UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K


            /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2005

                                       OR

          / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to ________

                        Commission file number 333-17795

                            WATERFORD GAMING, L.L.C.

             (Exact name of registrant as specified in its charter)


                 DELAWARE                              06-1465402
       -------------------------------              --------------------
       (State or other jurisdiction of               (I.R.S. employer
        incorporation or organization)              identification no.)


     914 Hartford Turnpike, P.O. Box 715
               Waterford, CT                               06385
     ------------------------------------               -----------
   (Address of principal executive offices)             (Zip Code)


        Registrant's telephone number, including area code (860) 442-4559

        Securities registered pursuant to Section 12(b) of the Act: NONE

    Title of each class            Name of each exchange on which registered
      Not applicable                          Not applicable

        Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days: Yes /X/ No / /.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: Not applicable.

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes / / No /X/

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common  equity,  as of
the last business day of the registrant's most recently  completed second fiscal
quarter. - Not applicable

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K  (e.g.,  Part I, Part II,  etc.)  into  which the  document  is
incorporated:  (1) Any  annual  report  to  security  holders;  (2) Any proxy or
information  statement;  and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980). - Not Applicable



<PAGE>



                            WATERFORD GAMING, L.L.C.
                               INDEX TO FORM 10-K



                                                                            PAGE
PART I
ITEM 1.     BUSINESS                                                           1
ITEM 2.     PROPERTIES                                                        13
ITEM 3.     LEGAL PROCEEDINGS                                                 13
ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               13

PART II
ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                STOCKHOLDERS MATTERS                                          14
ITEM 6.     SELECTED FINANCIAL DATA                                           14
ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS                 15
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        27
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       27
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE                           27
ITEM 9A.    CONTROLS AND PROCEDURES                                           27

PART III
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                28
ITEM 11.    EXECUTIVE COMPENSATION                                            29
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT AND RELATED STOCKHOLDER MATTERS                    29
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    30
ITEM 14.    PRINCIPAL ACCOUNTANT'S FEES AND SERVICES                          31

PART IV
ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                REPORTS ON FORM 8-K                                           32

Signatures                                                                    39



<PAGE>

                       CERTAIN FORWARD LOOKING STATEMENTS

This annual report on Form 10-K contains "forward-looking statements" within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"SECURITIES  ACT") and Section 21E of the  Securities  Exchange Act of 1934,  as
amended (the "EXCHANGE  ACT"),  including,  in particular,  the statements about
Waterford  Gaming,  L.L.C.  (the "COMPANY"),  Trading Cove Associates  ("TCA" or
"TRADING  COVE")  and the  Mohegan  Sun  Casino's  (the  "MOHEGAN  SUN")  plans,
strategies and prospects. Although the Company believes that such statements are
based on reasonable assumptions, these forward-looking statements are subject to
numerous factors,  risks and uncertainties  that could cause actual outcomes and
results to be materially  different from those projected.  These factors,  risks
and uncertainties  include, among others, the risk factors described below under
the heading  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations - Risk Factors" and the following:

a) the financial performance of the Mohegan Sun;
b) changes in laws or regulations (including, without limitation, gaming laws or
   regulations);
c) the effects of new  competition;  and d) general domestic and global economic
   conditions.

The  Company's,   TCA's  and  Mohegan  Sun's  actual  results,   performance  or
achievements could differ materially from those expressed in, or implied by, the
forward-looking  statements contained herein. The Company can give no assurances
that any of the events anticipated by the forward-looking  statements will occur
or, if any of them do, what  impact they will have on its results of  operations
and financial condition.  You are cautioned not to place undue reliance on these
forward-looking  statements,  which  speak  only as of the  date of this  annual
report on Form 10-K.


                                     PART I

Item 1. BUSINESS

A. THE COMPANY

The  Company  was formed  solely for the  purpose  of  holding  its  partnership
interest in Trading Cove Associates, a Connecticut general partnership.  Trading
Cove is the former manager and original  developer of the Mohegan Sun located in
Uncasville,  Connecticut,  a casino  owned by the  Mohegan  Tribe of  Indians of
Connecticut (the "MOHEGAN TRIBE" or the "TRIBE").  The Company's interest in TCA
is its principal asset and source of income and cash flow.

Trading Cove developed the Mohegan Sun and managed the property from its opening
in 1996 until  midnight  December  31,  1999.  On January 1, 2000,  Trading Cove
turned over management of the Mohegan Sun to the Mohegan Tribal Gaming Authority
(the "AUTHORITY").  TCA and the Company's  principals assisted the Mohegan Tribe
in obtaining federal recognition,  negotiating the tribal-state compact with the
State of Connecticut,  obtaining numerous governmental  approvals,  raising debt
financing for the initial  construction  and development of the Mohegan Sun, and
developing the Project Sunburst expansion (the "PROJECT SUNBURST EXPANSION"), an
approximately  $1.0  billion  expansion  at the Mohegan  Sun, the final phase of
which opened in June 2002.

The Company is a wholly owned subsidiary of Waterford Group, L.L.C.  ("WATERFORD
GROUP").  The Limited  Liability  Company  Agreement  of the  Company  (the "LLC
AGREEMENT") is effective  until  September 30, 2020 and may be terminated by the
Company's  sole member or upon the occurrence of certain events as stated in the
LLC Agreement.

The LLC Agreement provides for the property, affairs and business of the Company
to be managed by a four-member  Board of Directors  (the "BOARD OF  DIRECTORS"),
which consists of two directors  appointed by Slavik Suites, Inc. ("SLAVIK") and
two directors appointed by LMW Investments, Inc. ("LMW"). A quorum for the Board
of Directors  requires all four members.  LMW and Slavik  initially  contributed
capital  to the  Company  consisting  of all of their  respective  interests  in
Trading Cove.

Prior to the  offering of the  Company's  $65 Million  12.75%  Senior Notes (the
"12.75%  SENIOR  NOTES"),  Slavik  and LMW were  partners  of Trading  Cove.  In
connection with the formation of the Company, Slavik and LMW each contributed to
the Company its  interests in Trading Cove in exchange for a 66-2/3% and 33-1/3%
ownership  interest,  respectively,  of the Company.  Upon  consummation  of the
offering of the 12.75%  Senior  Notes,  (i) $6.7 million of the proceeds of such
offering  were  distributed  directly  to Slavik for the  purpose  of  redeeming
certain  ownership  interests  in Slavik,  and (ii) $3.3 million of the proceeds
were  distributed  to LMW,  which in turn loaned  such  proceeds to Len and Mark
Wolman,  as individuals,  who used such funds to purchase  certain  interests in
Slavik.  The Company used $10.6 million of the proceeds from the offering of the
12.75% Senior Notes to purchase RJH Development  Corp.'s  ownership  interest in
Trading   Cove.   As  a  result   of  these   transactions   (collectively   the
"REORGANIZATION"),  Slavik and LMW owned  67.7967%  and 32.2033% of the Company,
respectively.  The Company is a managing  general  partner of Trading Cove. As a
result of the  Reorganization,  the only two  partners  of Trading  Cove are the
Company and  Kerzner  Investments  Connecticut,  Inc.  ("KERZNER  INVESTMENTS"),
formerly Sun Cove Limited.


                                        1

<PAGE>

In  connection  with the  issuance on March 17, 1999 of the $125  Million  9.50%
Senior  Notes (the "9.50%  SENIOR  NOTES"),  each of Slavik and LMW  contributed
their  respective  interests in the Company  concurrently  to  Waterford  Group.
Waterford  Group is now the  sole  member  of the  Company.  Slavik  and LMW own
Waterford  Group in the same  respective  interest  as they had in the  Company,
which are as follows:



Slavik Suites, Inc.                         67.7967%
LMW Investments, Inc.                       32.2033%
                                          -----------
                                           100.0000%
                                          ===========


Additional  capital  contributions  may be made to the  Company  by its  member,
Waterford Group. If it is determined that the Company requires additional funds,
such funds may be loaned to the Company by its member  pursuant to the terms set
forth in the LLC Agreement;  however,  the indenture  governing the $155 Million
8.625%  Senior Notes (the "8.625%  SENIOR  NOTES"),  prohibits  the Company from
incurring  additional  indebtedness.  The LLC  Agreement  also provides that any
disputes which arise under the LLC Agreement and which remain  unresolved  after
30 days will be settled through arbitration.

LMW, one of the two members of Waterford  Group, is a development  firm based in
southeastern Connecticut.  LMW is owned by Len Wolman and Mark Wolman. The other
member of Waterford Group, Slavik, is based in Detroit,  Michigan. The directors
of Slavik are Del J. Lauria, Len Wolman, Mark Wolman and Stephan F. Slavik.

For the  fiscal  years  2005,  2004 and  2003,  the  Company  had net  income of
$17,606,670,  $13,923,694  and  $3,891,633,  respectively.  At the end of fiscal
years  2005,  2004 and  2003,  the  Company  had total  assets  of  $33,791,451,
$34,490,765, and $36,219,560, respectively.

As of December 31, 2005,  the Company  employed  one  full-time  employee and no
part-time  employees.  The  Company's  employee is not  covered by a  collective
bargaining agreement.

B. $155 MILLION 8.625% SENIOR NOTES PAYABLE:

On June 11, 2003,  the Company and Waterford  Gaming  Finance Corp.  ("FINANCE")
issued the 8.625%  Senior  Notes.  Payment of the principal of, and interest on,
the  8.625%  Senior  Notes is pari  passu in  right of  payment  with all of the
Company's and Finance's  senior debt,  and  effectively  subordinate in right of
payment to all of the Company's and Finance's existing and future collateralized
and subordinated debts.

The 8.625%  Senior  Notes bear  interest at a rate of 8.625% per annum,  payable
semi-annually  in  arrears  on  March  15th  and  September  15th of each  year,
commencing  September 15, 2003.  The  principal  amount due on the 8.625% Senior
Notes is payable on September 15, 2012.

The  Company  and  Finance  may elect to redeem all or any of the 8.625%  Senior
Notes at any time on or after September 15, 2008 at a redemption  price equal to
a  percentage  of the  principal  amount of notes being  redeemed  plus  accrued
interest. Such percentage is set forth in the following table:

<TABLE>
        <S>                                                     <C>
        If notes are redeemed                                   Percentage
        ---------------------                                   ----------

        after September 14, 2008 but
        on or before September 14, 2009                          103.551%
        after September 14, 2009 but
        on or before September 14, 2010                          102.537%
        after September 14, 2010
        but on or before September 14, 2011                      101.522%
        after September 14, 2011 but
        on or before September 14, 2012                          100.507%
        after September 14, 2012                                 100.000%

</TABLE>


The 8.625% Senior Notes provide that upon the  occurrence of a Change of Control
as defined in the  indenture  governing  the 8.625%  Senior  Notes (the  "8.625%
SENIOR NOTES  INDENTURE"),  the holders  thereof will have the option to require
the redemption of the 8.625% Senior Notes at a redemption price equal to 101% of
the principal amount thereof plus accrued interest.


                                        2

<PAGE>

Pursuant to the terms of the 8.625% Senior Notes  Indenture,  if the Company and
Finance  have any Company  Excess  Cash,  as defined in the 8.625%  Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all  Required  IRA True-Up  Payments,  as defined in the 8.625%
Senior Notes Indenture, and less any amount set aside for the payment of accrued
and  unpaid  interest  on the  interest  payment  date that  corresponds  to the
redemption date for which the  determination is being made, to redeem the 8.625%
Senior Notes on the March 15th or September 15th following such dates.  Any such
redemption will be made at a price equal to a percentage of the principal amount
being redeemed. Such percentage is set forth in the following table:




<TABLE>
        <S>                                       <C>
        If notes are redeemed with                Redemption Price (expressed as a percentage
        Company Excess Cash                       of the principal amount being redeemed)
        -------------------------                 --------------------------------------------

        after September 14, 2003 but
        on or before September 14, 2004                          108.625%
        after September 14, 2004 but
        on or before September 14, 2005                          107.610%
        after September 14, 2005 but
        on or before September 14, 2006                          106.596%
        after September 14, 2006 but
        on or before September 14, 2007                          105.581%
        after September 14, 2007 but
        on or before September 14, 2008                          104.566%
        after September 14, 2008 but
        on or before September 14, 2009                          103.551%
        after September 14, 2009 but
        on or before September 14, 2010                          102.537%
        after September 14, 2010
        but on or before September 14, 2011                      101.522%
        after September 14, 2011 but
        on or before September 14, 2012                          100.507%
        after September 14, 2012                                 100.000%

</TABLE>


The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company  Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the  Company  and  Finance  have  determined  was  available  for the  mandatory
redemption  of the 8.625%  Senior  Notes on February  1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture,  (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated,  and (d) the
redemption price at which such redemption was made.

<TABLE>
<S>                 <C>                        <C>                      <C>                    <C>

Date                Company Excess Cash        Principal Amount of      Dates of Redemption     Price (expressed as percentage of
                    (approximately)            notes redeemed                                   principal amount being redeemed
----------------    -------------------        -------------------      --------------------    ---------------------------------
August 1, 2003        $   5,568,000              $ 1,912,000             September 15, 2003                 108.625%
February 1, 2004      $  14,534,000              $ 7,302,000               March 15, 2004                   108.625%
August 1, 2004        $  11,695,000              $ 5,025,000             September 15, 2004                 107.610%
February 1, 2005      $  12,098,000              $ 5,600,000               March 15, 2005                   107.610%
August 1, 2005        $  11,798,000              $ 5,599,000             September 15, 2005                 106.596%
February 1, 2006      $  12,492,000              $ 6,477,000               March 15, 2006                   106.596%


</TABLE>


In certain  circumstances,  if either the  Company or Kerzner  Investments,  the
Company's  partner  in TCA,  exercises  the  option  to buy or sell  partnership
interests in TCA, the Company and Finance must redeem the 8.625% Senior Notes.

The 8.625% Senior Notes  Indenture  contains  certain  affirmative  and negative
covenants   customarily   contained  in  such  agreements,   including   without
limitation,  covenants  that  restrict,  subject  to  specified  exceptions  the
Company's and Finance's ability to (i) borrow money, (ii) make  distributions on
its equity interests or certain other restricted  payments,  (iii) use assets as
security in other transactions,  (iv) make investments, (v) sell other assets or
merge with other companies,  and (vi) engage in any business except as currently
conducted  or  contemplated  or amend their  relationship  with TCA.  The 8.625%
Senior Notes  Indenture  also provides for  customary  events of default and the
establishment  of a  restricted  investment  account with a trustee for interest
reserves  ("IRA").  The IRA consists of an amount of funds equal to the interest
payment due on the 8.625% Senior Notes on the following  interest  payment date.
The IRA will be released  and the Company can make a permitted  distribution  to
Waterford  Group once the Leverage  Ratio, as defined in the 8.625% Senior Notes
Indenture, is less than or equal to 3.0 to 1.0.

                                        3



<PAGE>

The fair value of the Company's  long term debt at December 31, 2005 and 2004 is
estimated to be approximately $137,984,000 and $150,614,000, respectively, based
on the market quotations obtained by the Company.

In June 2005,  the Financial  Accounting  Standards  Board issued DIG Issue B38,
"Evaluation  of  Net  Settlement  with  Respect  to  the  Settlement  of a  Debt
Instrument  Through  Exercise of an Embedded Put Option or Call Option"  ("Issue
B38").  As a  result  of the  issuance  of Issue  B38,  effective  with  periods
beginning  after  December  15, 2005,  the Company is required to bifurcate  and
separately  account for the excess cash  feature  embedded in its 8.625%  Senior
Notes under the provisions of Financial Accounting Standard No. 133, "Accounting
for Derivative  Instruments and Hedging  Activities".  The Company is evaluating
the impact of this  guidance and will adopt the  accounting in its first quarter
of 2006.

The 8.625%  Senior  Notes  Indenture  was filed as an  exhibit to the  Company's
Quarterly Report on Form 10-Q for the period ended June 30, 2003 (Securities and
Exchange  Commission (the  "COMMISSION")  File No. 333-17795) as accepted by the
Commission on August 12, 2003 and is incorporated herein by reference.

C. TRADING COVE ASSOCIATES

TCA was organized on July 23, 1993. The primary purpose of TCA has been,

- to assist the Tribe in obtaining federal recognition,
- to negotiate the tribal-state  compact with the State of Connecticut on behalf
  of the Tribe,
- to obtain  financing  for the initial  development  of the  Mohegan  Sun, - to
negotiate the Amended and Restated Gaming Facility Management Agreement
  (the "MANAGEMENT AGREEMENT"),
- to oversee all  operations  of the  Mohegan  Sun  pursuant to the terms of the
  Management Agreement until midnight December 31, 1999, and
- to participate in the design and development of the Mohegan Sun.

The Mohegan Sun commenced  operations  on October 12, 1996.  From the opening of
the Mohegan Sun until January 1, 2000, TCA oversaw the Mohegan Sun's  day-to-day
operations.

TCA's partnership agreement (the "TCA PARTNERSHIP  AGREEMENT") will terminate on
December 31, 2040, or earlier,  in accordance with its terms.  The Company has a
50% partnership  interest in TCA. The remaining 50% interest is owned by Kerzner
Investments,   an  affiliate   of  Kerzner   International   Limited   ("KERZNER
INTERNATIONAL").

TCA's sole source of revenue is payment  under the  Relinquishment  Agreement as
described below.

D. TRADING COVE ASSOCIATES MATERIAL AGREEMENTS

1 - RELINQUISHMENT AGREEMENT

On February  7, 1998,  TCA and the  Authority  entered  into the  Relinquishment
Agreement   (the   "RELINQUISHMENT   AGREEMENT").   Under   the   terms  of  the
Relinquishment  Agreement,  TCA  continued  to manage the  Mohegan Sun under the
Management  Agreement until midnight  December 31, 1999, and on January 1, 2000,
the Management Agreement terminated and the Tribe assumed day-to-day  management
of the Mohegan Sun.

Under the Relinquishment Agreement, to compensate TCA for terminating its rights
under the Management Agreement and the Hotel/Resort  Management  Agreement,  the
Authority agreed to pay to TCA a fee (the "RELINQUISHMENT  FEES") equal to 5% of
Revenues, as defined in the Relinquishment  Agreement,  generated by the Mohegan
Sun during the 15-year period  commencing on January 1, 2000,  including revenue
generated by the Project Sunburst expansion.

The  Relinquishment  Fees are divided  into senior  relinquishment  payments and
junior  relinquishment  payments,  each of  which  equals  2.5%  of  "Revenues".
Revenues are defined in the  Relinquishment  Agreement as gross gaming  revenues
(other  than Class II gaming  revenue)  and all other  facility  revenues.  Such
revenue  includes hotel  revenues,  food and beverage sales,  parking  revenues,
ticket revenues and other fees or receipts from the convention/events  center in
the Project  Sunburst  expansion and all rental or other  receipts from lessees,
licensees  and  concessionaires  operating  in the  facility,  but not the gross
receipts of such lessees,  licensees and concessionaires.  Such revenues exclude
revenues generated by any other expansion of the Mohegan Sun.

Senior  relinquishment  payments are payable quarterly in arrears  commencing on
April  25,  2000  for  the  quarter  ended  March  31,  2000,   and  the  junior
relinquishment  payments are payable semi-annually in arrears commencing on July
25, 2000 for the six months ended June 30, 2000,  assuming  sufficient funds are
available after satisfaction of the Authority's senior  obligations,  as defined
in the  Relinquishment  Agreement.  See section  below  titled  "Risk  Factors -
Subordination - Trading Cove's right to receive the relinquishment payments from
the  Authority  is junior to certain  payments by the  Authority  to the Mohegan
Tribe and holders of its indebtedness."


                                        4



<PAGE>

A summary of relinquishment  payments received by TCA for 2005, 2004 and 2003 is
as follows:

<TABLE>
<CAPTION>

<S>                                     <C>             <C>             <C>
                DATE                        SENIOR          JUNIOR          TOTAL
-------------------------------------   -------------   -------------   -------------

April 25, 2005                          $   8,330,592   $          --   $   8,330,592
July 25, 2005                               9,104,412      17,435,004      26,539,416
October 25, 2005                            9,576,524           7,072       9,583,596
January 25, 2006                            9,470,705      19,040,157      28,510,862
                                        -------------   -------------   -------------
Relinquishment Fees for the year
 ended December 31, 2005                $  36,482,233   $  36,482,233   $  72,964,466
                                        =============   =============   =============

April 26, 2004                          $   8,196,363   $          --   $   8,196,363
July 26, 2004                               8,477,030      16,673,392      25,150,422
October 25, 2004                            9,165,092              --       9,165,092
January 25, 2005                            8,712,261      17,877,353      26,589,614
                                        -------------   -------------   -------------
Relinquishment Fees for the year
 ended December 31, 2004                $  34,550,746   $  34,550,745   $  69,101,491
                                        =============   =============   =============

April 25, 2003                          $   7,433,160   $          --   $   7,433,160
July 25, 2003                               8,101,075      15,534,235      23,635,310
October 27, 2003                            8,691,811              --       8,691,811
January 26, 2004                            8,323,731      17,015,541      25,339,272
                                        -------------   -------------   -------------
Relinquishment Fees for the year
 ended December 31, 2003                $  32,549,777   $  32,549,776   $  65,099,553
                                        =============   =============   =============






</TABLE>

The amount of  Relinquishment  Fees  reported in this annual report on Form 10-K
are based upon Revenues reported to TCA by the Authority.

The  senior and  junior  relinquishment  payments  rank  behind the  Authority's
obligation to pay an annual minimum  priority  distribution to the Mohegan Tribe
and all of the  Authority's  existing and future  senior  secured  indebtedness,
including  the  Authority's  bank  credit  facility.   As  a  result,  upon  any
distribution  by the Authority to its  creditors in a  bankruptcy,  liquidation,
reorganization or similar proceeding  relating to the Authority or its property,
the  priority  distributions  owed to the  Mohegan  Tribe and the holders of the
Authority's senior secured  indebtedness will be entitled to be paid in full and
in cash  before  any  senior or junior  relinquishment  payments  may be made to
Trading Cove. In addition, the junior relinquishment payments rank behind all of
the Authority's  existing and future senior  indebtedness.  As a result,  in any
such  proceedings,  the holders of the Authority's  senior  indebtedness will be
entitled  to be paid  in  full  and in cash  before  any  junior  relinquishment
payments may be made to Trading Cove.

In the event of a bankruptcy, liquidation,  reorganization or similar proceeding
relating to the Authority,  Trading Cove will receive  distributions (if at all)
on a pari passu basis with all other holders of the Authority's senior unsecured
indebtedness with respect to the senior relinquishment  payments from the assets
remaining  after the Authority has paid all of its senior  secured  indebtedness
and with all other  holders of  subordinated  indebtedness  with  respect to the
junior relinquishment payments from the assets remaining after the Authority has
paid all of its  senior  indebtedness.  However,  the  Relinquishment  Agreement
requires  that amounts  otherwise  payable to Trading  Cove in a  bankruptcy  or
similar  proceeding  of the  Authority  be paid to  holders  of  senior  secured
indebtedness   until  they  are  paid  in  full,  with  respect  to  the  senior
relinquishment  payments,  and to holders of senior secured  indebtedness,  with
respect to junior relinquishment payments,  instead of to Trading Cove. For that
reason  Trading  Cove  may  receive  less,  ratably,   than  holders  of  senior
indebtedness of the Authority in any such proceeding. In any of these cases, the
Authority may not have sufficient  funds to pay all of its creditors and Trading
Cove may  receive  less,  ratably,  than the holders of the  Authority's  senior
indebtedness.

In the event of an acceleration of any indebtedness of the Authority, the senior
and junior relinquishment payments that are not yet due under the Relinquishment
Agreement  would be effectively  subordinated  to the  Authority's  indebtedness
since the  payment  obligations  under the  Relinquishment  Agreement  cannot be
accelerated by their terms and have no blockage rights as designated senior debt
of the Authority.


                                        5


<PAGE>

If Trading Cove becomes the debtor in a bankruptcy  or similar  proceeding,  the
Company would have the status of an equity holder, not a creditor, and would not
be entitled to receive any  distributions  until all of Trading Cove's creditors
were paid in full.

If the  Authority  became the  debtor in a  bankruptcy  or  similar  proceeding,
Trading Cove's rights and recovery would depend on numerous  factors,  including
the type and outcome of the proceeding.  If the Authority ceased  operations and
liquidated,  under Chapter 7 of the Bankruptcy Code or otherwise, Trading Cove's
claim would likely be limited to the amount of unpaid  Relinquishment Fees as of
the time of liquidation.  If the Authority  reorganized  under Chapter 11 of the
Bankruptcy  Code,  Trading  Cove's claim would likely be based on an estimate of
the Mohegan Sun's future revenues for the term of the Relinquishment  Agreement.
In any event,  any  recovery by Trading  Cove on its claims for senior or junior
Relinquishment  Fees  would  be  subject  to the  prior  payment  in full of all
indebtedness senior thereto.

As a result, there is no assurance that, in the event of bankruptcy or financial
difficulty of either Trading Cove or the Authority, the Company would ultimately
recover  sufficient (or any) funds to pay amounts  outstanding  under the 8.625%
Senior Notes.

Under the  Relinquishment  Agreement,  the Authority makes certain covenants for
the benefit of Trading Cove, including the following:

(1) PAYMENTS TO THE MOHEGAN TRIBE.  Except for payments of the minimum  priority
distributions  and  reasonable  charges  for  utilities  or  other  governmental
services  supplied by the Mohegan Tribe to the Authority,  the Authority may not
make any  distributions  to the  Mohegan  Tribe or its  members  at any time any
relinquishment payments are outstanding.

(2)  AFFILIATE  TRANSACTIONS.  Except  for  payments  of  the  minimum  priority
distributions  and  reasonable  charges  for  utilities  or  other  governmental
services supplied by the Mohegan Tribe to the Authority, the Authority agrees to
abide by certain  restrictions  on  transactions  with the Mohegan Tribe and its
members, all as set forth in the Relinquishment Agreement.

(3)  REPLACEMENT/RESTORATION  OF THE MOHEGAN  SUN. If any portion of the Mohegan
Sun facilities is damaged by fire or other casualty, the Authority shall replace
or restore such facilities to substantially  the same condition as prior to such
casualty,  but only to the extent insurance  proceeds are available to do so. If
sufficient  insurance  proceeds  are  not  available,  the  Authority  will  use
reasonable efforts to obtain the required financing,  on commercially reasonable
terms, to undertake and complete such replacement or restoration.

(4)  BUSINESS  PURPOSE.  The  Authority  has agreed  that during the term of the
Relinquishment  Agreement  it will engage  only in the casino  gaming and resort
business (and any incidental  business or activity) and will continue to operate
the Mohegan Sun as currently operated.

Under the  Relinquishment  Agreement,  the  Authority and Trading Cove have each
agreed not to solicit any  employee of the other party or any  affiliate  of the
other party for five years.

With certain  limitations set forth in the  Relinquishment  Agreement,  both the
Mohegan Tribe and the Authority waive immunity from uncontested suit for certain
enforcement rights of Trading Cove arising under the Relinquishment Agreement.

The  Company's  right to receive a portion of the  relinquishment  payments from
Trading  Cove is  governed  by the  Amended  and  Restated  Omnibus  Termination
Agreement discussed below.

The Relinquishment  Agreement was filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1998 (Commission File No.
333-17795),  as  accepted  by  the  Commission  on  November  13,  1998,  and is
incorporated herein by reference.

2 - DEVELOPMENT AGREEMENT AND RELATED AGREEMENTS

On February 7, 1998, TCA and the Authority entered into the Development Services
Agreement (the "DEVELOPMENT AGREEMENT").  Pursuant to the Development Agreement,
TCA  agreed to oversee  the  design,  construction,  furnishing,  equipping  and
staffing of the Project Sunburst  expansion for a $14.0 million  development fee
(the "DEVELOPMENT FEE").

The first phase of the Project Sunburst  expansion,  including the Casino of the
Sky, The Shops at Mohegan Sun, and the  10,000-seat  Mohegan Sun Arena opened in
September 2001.

In April 2002, 734 of the approximately 1,200-hotel rooms in the 34-story luxury
hotel as well as the meeting and convention space and spa opened. The balance of
the  approximately  1,200-hotel  rooms  opened  during  June 2002.  The  Project
Sunburst expansion is complete in terms of the Development Agreement.


                                        6


<PAGE>

Pursuant  to  the  Development  Agreement,  the  Authority  agreed  to  pay  the
Development  Fee to TCA  quarterly  beginning  on  January  15,  2000,  based on
incremental  completion  of the Project  Sunburst  expansion  as of each payment
date.  TCA had received  $14.0  million from the  Authority as  Development  Fee
payments.

On February 9, 1998, TCA and Kerzner International  Management Limited ("KIML"),
an affiliate of Kerzner Investments,  the Company's partner in TCA, entered into
the  Agreement  Relating to  Development  Services  (the  "DEVELOPMENT  SERVICES
AGREEMENT PHASE II").  Pursuant to the Development  Services Agreement Phase II,
TCA  subcontracted  with KIML, who agreed to perform those services  assigned to
KIML  by TCA in  order  to  facilitate  TCA's  fulfillment  of  its  duties  and
obligations to the Authority under the Development Agreement.  KIML assigned the
Development Services Agreement Phase II to Kerzner Investments.

Pursuant to the  Development  Services  Agreement  Phase II, TCA pays to Kerzner
Investments a fee, as subcontractor  (the "DEVELOPMENT  SERVICES FEE PHASE II"),
equal  to 3% of  the  development  costs  of  the  Project  Sunburst  expansion,
excluding  capitalized  interest,  less all costs  incurred by TCA in connection
with the Project  Sunburst  expansion.  At December 31, 2005, all of TCA's costs
associated  with the  Project  Sunburst  expansion  had not been  paid,  however
reasonable  estimates of those costs have been  provided for in TCA's  financial
statements at December 31, 2005. The  Development  Services Fee Phase II is paid
in installments - on December 31, 1999,  December 31, 2000 and on the Completion
Date,  as defined in the  Development  Agreement - with the final  payment being
made when the actual  development  costs of the Project  Sunburst  expansion are
known. TCA pays the Development  Services Fee Phase II from available cash flow,
if any,  in  accordance  with  the  Amended  and  Restated  Omnibus  Termination
Agreement described below. TCA's total development costs of the Project Sunburst
expansion which comprises the Development  Services Fee Phase II and TCA's costs
related to the  development  of the Project  Sunburst  expansion will exceed the
related revenue received by TCA under the Development Agreement by approximately
$15,964,000.  This cost  overrun  has  previously  been  recorded  by TCA in its
statement of operations.

Before KIML  assigned the  Development  Services  Agreement  Phase II to Kerzner
Investments,  it entered into the Local  Construction  Services  Agreement  (the
"LOCAL  CONSTRUCTION  SERVICES  AGREEMENT")  with  Wolman  Construction,  L.L.C.
("CONSTRUCTION"),  an affiliate of the Company,  pursuant to which  Construction
agreed to provide certain of those services  assigned to KIML by TCA pursuant to
the Development  Services  Agreement Phase II. Kerzner  Investments  assumed the
obligation of KIML under the Local Construction Services Agreement.

Pursuant  to the Local  Construction  Services  Agreement,  Kerzner  Investments
agreed to pay to Construction a fee equal to 20.83% of the Development  Services
Fee Phase II as and when Kerzner Investments  receives payment from TCA pursuant
to the Development Services Agreement Phase II.

Pursuant to a Letter Agreement,  Construction has subcontracted  with The Slavik
Company,  an affiliate of the Company,  to provide  certain  services  under the
Local Construction Services Agreement.  In exchange for providing such services,
Construction  agreed that The Slavik Company would be paid a fee equal to 14.30%
of its fee under the Local Construction Services Agreement.

On April 26, 2000,  July 26,  2000,  January 26, 2001 and July 28, 2003 TCA paid
$3,095,000,  $1,238,000,  $6,474,000 and  $9,157,000,  respectively,  as partial
payment  of  the  Development  Services  Fee  Phase  II.  Construction  received
$644,688, $257,875,  $1,348,534 and $1,907,403,  respectively,  and Construction
paid The Slavik  Company  $92,190,  $36,876,  $192,840 and $259,121 on April 26,
2000, July 26, 2000, January 26, 2001 and July 28, 2003, respectively.

At December 31, 2005 TCA's accrued liability to Kerzner Investments with respect
to such fee was  approximately  $384,000  pursuant  to the  Development  Service
Agreement Phase II.

The  Development  Services  Agreement  was filed as an exhibit to the  Company's
Quarterly  Report  on  Form  10-Q  for  the  period  ended  September  30,  1998
(Commission File No.  333-17795),  as accepted by the Commission on November 13,
1998, and is incorporated herein by reference.


                                        7

<PAGE>

3 - TCA PARTNERSHIP AGREEMENT

In September 1994, Kerzner  Investments,  RJH Development Corp.,  Leisure Resort
Technology,  Inc.  ("LEISURE"),  Slavik  and LMW  entered  into an  amended  and
restated  partnership  agreement  to,  among  other  things:  (i) admit  Kerzner
Investments  as a  partner  to the  Trading  Cove  partnership;  (ii) act as the
exclusive agent of the Mohegan Tribe to manage and develop an entertainment  and
gaming facility on the Mohegan Tribal Reservation; and (iii) engage in any other
activities incidental or related to the foregoing.

In  February  1995,  the  parties  entered  into an  acknowledgment  and release
agreement  whereby Leisure  withdrew from Trading Cove for all purposes,  except
that Leisure  retained a 5%  "beneficial  interest" in Trading  Cove.  Leisure's
beneficial interest is defined as the right to receive certain  distributions of
excess  cash and the  organizational  and  administrative  fee on the earlier to
occur of (i) 14 years from the date of commencement of the Management  Agreement
and (ii) the termination of the Management Agreement.

On January 6, 1998,  pursuant to the Settlement and Release Agreement  described
in Item 3 (Legal  Proceedings)  the Company  paid $5.0  million to Leisure  and,
among other things, Leisure gave up (a) its beneficial interest of 5% in certain
fees and excess cash flows, as defined, of Trading Cove and (b) any other claims
it may have had against the  Company,  Kerzner  Investments  and Trading  Cove's
partners and former partner.

As a result of (i) a First  Amendment  to the Amended and  Restated  Partnership
Agreement of Trading  Cove,  dated  October 22, 1996 and (ii) an  Agreement  for
Purchase and Sale of Partnership Interest,  dated September 12, 1996 whereby RJH
Development  Corp.  agreed to sell and the Company agreed to buy RJH Development
Corp.'s  partnership  interest  for  $10.6  million,  the  Company  and  Kerzner
Investments are the only partners in Trading Cove.

Pursuant to the TCA Partnership  Agreement,  Trading Cove will continue to exist
until the first to occur of: (i) December 31, 2040; (ii) a final  disposition of
Trading Cove's interest in the Mohegan Sun (or any alternative facility that may
be  developed  or  acquired  pursuant  to  the  terms  of  the  TCA  Partnership
Agreement);  (iii) the  decision of the managing  partners to terminate  Trading
Cove; and (iv) any other event which results in dissolution of Trading Cove.

In connection with its entry into the  partnership,  Kerzner  Investments made a
capital  contribution  in an  amount  sufficient  to  equal  a  50%  partnership
interest.   The  TCA  Partnership  Agreement  provides  for  additional  capital
contributions.  In the event that Trading Cove requires  additional  funds,  and
subject to unanimous approval by the partners,  the partners may make loans on a
PRO RATA basis, based on their respective partnership interests.  Such loans are
non-recourse  and  unsecured and bear interest at an annual rate of 2% above the
prime rate.

In the event that the Company and Kerzner Investments  determine that additional
capital is required to fund TCA's  obligations,  either may make a capital call.
In the event that a capital call is made and Kerzner  Investments  does not make
the requested  additional capital contribution within 30 days, generally Kerzner
Investments is automatically deemed to have withdrawn from Trading Cove. In such
event,  Kerzner Investments is not entitled to any return of any of its previous
capital contributions or additional contributions,  but it is generally entitled
to receive repayment of any loans.

In the event that a capital call is made and the Company  elects not to make the
requested capital  contribution,  Kerzner Investments may, at its election,  pay
such  contributions,  which payment shall be deemed,  at the election of Kerzner
Investments,  to be  either  (i) a  loan  to  the  Company  or  (ii)  a  capital
contribution by Kerzner  Investments,  thereby increasing  Kerzner  Investments'
partnership interest and diluting the Company's partnership interest. The 8.625%
Senior Notes  Indenture  limits the  Company's  ability to make further  capital
contributions to TCA.

No partner is obligated to restore a capital account deficit.

The  partners  are required to bring to the  attention  of the  partnership  all
opportunities to manage or operate (1) any gaming  activities on Native American
reservations  and involving  Native  Americans or (2) any other gaming  activity
within 100 miles of the Mohegan Sun. Any such  opportunities  will be pursued by
an  affiliate of Trading  Cove,  in which the Company will not have any economic
interest.  The Company  and Kerzner  Investments  are the  managing  partners of
Trading Cove, and as such, have the full,  exclusive and absolute  right,  power
and authority to manage and control the partnership and the property, assets and
business  thereof.  All  decisions  relating to the  management  of Trading Cove
require unanimous agreement between the Company and Kerzner Investments.

The TCA  Partnership  Agreement  provides that Howard  Kerzner will serve as the
designated  representative  of Kerzner  Investments  in its capacity as managing
partner.  In the  absence of Mr.  Kerzner,  John  Allison  will serve as Kerzner
Investments' designated  representative.  Each designated representative has the
right,  power and  authority  to act for and on  behalf  of and to bind  Kerzner
Investments  with respect to all matters  relating to the  partnership.  The TCA
Partnership  Agreement  grants  Mr.  Kerzner  the right to  appoint a proxy upon
written   notice  to  the  Company.   Len  Wolman   serves  as  the   designated
representative of the Company.


                                        8


<PAGE>
In the event that a dispute  arises under the TCA  Partnership  Agreement,  upon
notice by one disputing party to the other, the parties have ten days to resolve
the  dispute.  If the dispute is not resolved in such  ten-day  period then,  in
accordance  with specific  notice  procedures  set forth in the TCA  Partnership
Agreement,  either party has the right to deliver a buy-out  notice to the other
to require such party to elect to either (i) sell their partnership  interest to
the party  delivering  the  notice  (at a price and under the terms set forth in
such buy-out notice),  or (ii) have the other party or its designee purchase the
interest of the party giving notice at the buy-out price.  In the event that the
party  receiving  the buy-out  notice fails to respond,  such party is deemed to
have agreed to sell its partnership interest to the party delivering such notice
at the buy-out price specified therein. See "Risk Factors--Risks Associated with
the Buy/Sell Option Under Trading Cove Partnership Agreement".

Subject to the following exceptions, Kerzner Investments is generally prohibited
from assigning its  partnership  interest.  Kerzner  Investments  may assign its
interest to (1)  certain of its  affiliates  and (2) to any party  making a bona
fide written  offer to purchase any or all of Kerzner  Investments'  partnership
interest if, after offering its interest to the Company at the same price and on
the same terms and  conditions as set forth in such written  offer,  the Company
elects not to purchase Kerzner Investments' partnership interest.

The Company is generally prohibited from assigning its partnership interest. The
Company may not assign its  interest  except (1) to an affiliate of the Company,
(2) to any party making a bona fide written  offer to purchase all, but not less
than all, of the Company's  partnership interest if, after offering its interest
to Kerzner Investments at the same price and on the same terms and conditions as
set forth in such written offer,  Kerzner Investments elects not to purchase the
Company's partnership interest.

Except as otherwise permitted by the TCA Partnership  Agreement,  no partner may
withdraw from the partnership without the consent of the remaining partners.  In
the event that a partner  withdraws from the partnership in violation of the TCA
Partnership Agreement, such partner will be liable to the remaining partners for
all damages caused by such  withdrawal and shall  immediately  cease to have any
rights (including rights to receive any monies) in the partnership.

The Amended and Restated Partnership Agreement of Trading Cove Associates, dated
as of September  21,  1994,  among Sun Cove Limited  (now,  Kerzner  Investments
Connecticut,  Inc.), RJH Development  Corp.,  Leisure Resort  Technology,  Inc.,
Slavik Suites,  Inc.,  and LMW  Investments,  Inc.,  and the First  Amendment to
Amended and Restated Partnership Agreement of Trading Cove Associates,  dated as
of  October  22,  1996,  among  Sun  Cove  Limited  (now,  Kerzner   Investments
Connecticut, Inc.), Slavik Suites, Inc., RJH Development Corp., LMW Investments,
Inc.  and  Waterford  Gaming,  L.L.C.  were filed as exhibits  to the  Company's
Registration  Statement  on Form  S-4,  filed  with  the  Commission  (File  No.
333-17795)  and declared  effective on May 15,  1997,  and each is  incorporated
herein by reference.

4 - AMENDED AND RESTATED OMNIBUS TERMINATION AGREEMENT

Effective March 18, 1999, the Amended and Restated Omnibus Termination Agreement
(the "AMENDED AND RESTATED OMNIBUS  TERMINATION  AGREEMENT") was entered into by
TCA, Kerzner International,  the Company, KIML, LMW, Kerzner Investments, Slavik
and  Construction.  The Amended and Restated Omnibus  Termination  Agreement (i)
terminated  the  Memorandum of  Understanding,  dated February 7, 1998; and (ii)
effective  January  1, 2000  terminated  a) the  Amended  and  Restated  Omnibus
Financing  Agreement,  b) the Completion  Guarantee and  Investment  Banking and
Financing Arrangement Fee Agreement (the "FINANCING ARRANGEMENT AGREEMENT");  c)
the Management  Services  Agreement;  d) the  Organizational  and Administrative
Services  Agreement;  e) the  Marketing  Services  Agreement;  and  f) a  Letter
Agreement relating to expenses, dated October 19, 1996.

In consideration  for the termination of such agreements,  TCA agreed to use its
cash to pay the following obligations in the priority set forth below:

(i)  First,  to pay all  unpaid  amounts  which may be due under the  terminated
Letter  Agreement  and to pay certain  affiliates  of the Company and to Kerzner
Investments  a  percentage  of an annual  fee of $2.0  million  less the  actual
expenses  incurred by TCA during such year.  Such annual fee is payable in equal
quarterly  installments  beginning  March 31, 2000 and ending December 31, 2014.
For the years ended December 31, 2005,  2004 and 2003,  $1,851,397  ($925,698 to
Kerzner  Investments  and $925,699 to  affiliates  of the  Company),  $1,869,157
($934,579 to Kerzner  Investments and $934,578 to affiliates of the Company) and
$1,840,346  ($920,173  to each of  Kerzner  Investments  and  affiliates  of the
Company), respectively, had been incurred by TCA in terms of the first priority.

(ii)  Second,  to return all capital  contributions  made by the partners of TCA
after  September 29, 1995. As of December 31, 2005, $0 in capital  contributions
remained outstanding.

                                        9
<PAGE>


(iii)  Third,  to pay any accrued  amounts for  obligations  performed  prior to
January 1, 2000 under the  Financing  Arrangement  Agreement.  All such required
payments were made during 2000.

(iv) Fourth,  to make the payments set forth in the  agreements  relating to the
Development  Services  Agreement  Phase II and the Local  Construction  Services
Agreement.  No such  payments  are  required or due at December  31,  2005.  The
accrued  liability to Kerzner  Investments  with respect to such fee at December
31, 2005 was approximately $384,000.

(v) Fifth,  to pay Kerzner  Investments an annual fee (in the form of a priority
distribution)  of $5.0 million payable in equal quarterly  installments of $1.25
million beginning March 31, 2000 and ending December 31, 2006.

(vi) Sixth, to pay any accrued amounts for obligations performed with respect to
periods prior to January 1, 2000 under the Management  Services  Agreement,  the
Organizational and Administrative  Services Agreement and the Marketing Services
Agreement.  The final  required  payments  under this sixth  priority  were made
during 2001.

(vii) Seventh,  for the period  beginning March 31, 2000 and ending December 31,
2014, to pay each of Kerzner  Investments  and the Company  twenty-five  percent
(25%) of the relinquishment payments as distributions.

(viii) Eighth, to distribute all excess cash.

On January 26, 2006, TCA made distributions of $1,250,000  pursuant to the fifth
priority,  $14,262,503  ($7,131,252 to Kerzner Investments and $7,131,251 to the
Company) pursuant to the seventh priority and $12,064,928 ($6,032,464 to each of
Kerzner  Investments  and the  Company)  pursuant to the eighth  priority.  Such
distributions will be recorded in the fiscal 2006 financial statements.

In  addition,  TCA will not make any  distributions  pursuant to the Amended and
Restated Omnibus Termination  Agreement until it has annually distributed to its
partners  pro rata,  the amounts  related to its  partners  tax  obligations  as
described in Section  3.03a(1) of the TCA  Partnership  Agreement less twice the
amount of all other funds paid or  distributed  to the Company  during such year
pursuant to the Amended and Restated Omnibus Termination Agreement.

To the extent TCA does not have adequate  cash to make the payments  pursuant to
the Amended and Restated Omnibus Termination Agreement, such amount due shall be
deferred  without the accrual of interest until TCA has  sufficient  cash to pay
them.

The Amended and Restated Omnibus  Termination  Agreement was filed as an exhibit
to the  Company's  Quarterly  Report on Form 10-Q for the period ended March 31,
2001  (Commission  File No.  333-17795) as accepted by the Commission on May 14,
2001, and is incorporated herein by reference.

E. THE MOHEGAN TRIBAL GAMING AUTHORITY

The Tribe is a federally recognized Indian tribe with an approximately  405-acre
reservation  situated in  southeastern  Connecticut.  The Tribe  established the
Authority  on July 15, 1995 with the  exclusive  power to conduct  and  regulate
gaming activities for the Tribe. Under the Indian Gaming Regulatory Act of 1988,
as amended ("IGRA"), federally recognized Indian tribes are permitted to conduct
full-scale  casino  gaming  operations on  tribal-land,  subject to, among other
things,  the negotiation of a tribal state compact with the affected state.  The
Tribe and the  State of  Connecticut  have  entered  into  such a  compact  (the
"MOHEGAN COMPACT") that has been approved by the U.S. Secretary of the Interior.
The Authority is governed by a management board (the "MANAGEMENT BOARD"),  which
consists of the nine members of the Mohegan  Tribal  Council (the governing body
of the  Tribe).  Any change in the  composition  of the Mohegan  Tribal  Council
results in a corresponding change in the Management Board.

Under the terms of the Relinquishment  Agreement, at midnight December 31, 1999,
the Management  Agreement  terminated,  and on January 1, 2000 the Tribe assumed
day-to-day management of the Mohegan Sun.

The Tribe and the Authority have entered into a land lease ("LEASE") pursuant to
which the Tribe is leasing to the Authority the land on which the Mohegan Sun is
located (the  "SITE").  The Site is part of the Tribe's  approximately  405-acre
reservation  which was acquired and is held in trust for the Tribe by the United
States of America with the Tribe  retaining  perpetual  rights to the use of the
Site.

                                       10

<PAGE>
F. THE MOHEGAN TRIBAL GAMING AUTHORITY

The Authority  owns and operates the Mohegan Sun, an  approximately  3.0 million
square foot gaming and entertainment  complex on a 240-acre site overlooking the
Thames River on the Tribe's reservation in southeastern Connecticut. The Mohegan
Sun is located approximately one mile from the interchange of Interstate 395 and
Route 2A in  Uncasville,  Connecticut.  The  Authority  constructed  a four-lane
access road and  entrance/exit  ramps off of Route 2A,  providing  guests direct
access to Interstate 395 and Interstate 95, the main highways connecting Boston,
Providence and New York City. The Mohegan Sun opened in October 1996.

The gaming and entertainment complex includes the following:

CASINO OF THE EARTH.  The Casino of the Earth has  approximately  179,500 square
feet of gaming space and offers  approximately 3,800 slot machines and 195 table
games (including,  blackjack,  roulette, craps and baccarat).  Food and beverage
amenities,  including the Uncas  American  Indian Grill, a 285-seat full service
restaurant and bar, three  full-service  themed fine dining  restaurants  with a
fourth area  featuring  cuisine  from all three  themes,  a 610-seat  buffet,  a
ten-station food court featuring international and domestic cuisine and multiple
service bars, all operated by the Authority,  for a total of approximately 1,700
restaurant seats. An approximately  10,000 square foot, 410-seat lounge features
live  entertainment  seven days a week. There is an approximately  11,000 square
foot simulcasting race book facility,  and four retail shops providing  shopping
opportunities ranging from Mohegan Sun logo souvenirs to cigars.

CASINO OF THE SKY. The Casino of the Sky has  approximately  119,000 square feet
of gaming space and offers approximately 2,400 slot machines and 105 table games
(including,   blackjack,  roulette,  craps  and  baccarat).  Food  and  beverage
amenities,  include two full-service restaurants, two quick-service restaurants,
a 24-hour  coffee shop, a 320-seat  buffet,  a six station food court  featuring
international  and domestic  cuisine and five  lounges and bars  operated by the
Authority,  as well as four  full-service  and three  quick-service  restaurants
operated by third-parties,  for a total of approximately 2,600 restaurant seats,
Mohegan After Dark, consisting of a nightclub, a lounge and a pub, which are all
operated by a third party,  the Mohegan Sun Arena with seating for up to 10,000,
a 350-seat  cabaret,  a child care facility and an arcade-style  recreation area
operated by a third party, The Shops at Mohegan Sun containing  approximately 29
different  retail  shops,  seven  of  which  are  owned  by  the  Authority,  an
approximately  1,200-room luxury hotel, an approximately  20,000 square foot spa
operated by a third party and  approximately  100,000  square feet of convention
space.

Mohegan  Sun has  parking  spaces  for  approximately  13,000  guests  and 3,100
employees.  In addition,  the Authority  operates an approximately  4,000 square
foot,  20-pump gasoline  station and convenience  center located adjacent to the
Mohegan Sun.

The Authority formed the Mohegan  Basketball Club,  ("MBC"),  for the purpose of
holding a membership in the Women's National Basketball Association ("WNBA") and
owning and operating a  professional  basketball  team in the WNBA.  MBC entered
into  a  membership  agreement  with  the  WNBA  permitting  it to  operate  the
Connecticut  Sun  basketball  team. The team plays its home games in the Mohegan
Sun Arena.

POCONO DOWNS. On January 25, 2005 the Authority and its wholly owned subsidiary,
Mohegan Commercial  Ventures PA, LLC acquired from subsidiaries of Penn National
Gaming, Inc. the Pocono Downs Racetrack,  a standardbred harness racing facility
located on approximately 400 acres of land in Plains Township,  Pennsylvania, or
Pocono Downs, and five Pennsylvania  off-track  wagering  facilities  located in
Carbondale, East Stroudsburg,  Erie, Hazleton and Lehigh Valley (Allentown). The
Pocono  Downs  harness  racing  facility  is  currently  one of only two harness
racetracks in Pennsylvania and one of only four  thoroughbred and harness racing
facilities in the state. It has 5/8 mile all-weather, lighted track with seating
for approximately  3,500 and parking capacity for approximately  6,500.  Harness
racing has been  conducted  at Pocono Downs since 1965,  and in 2005,  the track
held 143  live  racing  days.  The  Lehigh  Valley  (Allentown)  OTW is a 28,000
square-foot facility and is the largest OTW in the state of Pennsylvania.

                                       11


<PAGE>
The  Authority  has the  right to apply  for a  Pennsylvania  Category  One Slot
Machine License, which, if approved, would initially permit the installation and
operation of up to 3,000 slot  machines at Pocono  Downs.  Down's  Racing,  L.P.
submitted an  application  for a conditional  Category One Slot Machine  License
with the Pennsylvania  Gaming Control Board, or PGCB, on December 8, 2005. Downs
Racing L.P. will submit an application for a permanent Category One Slot Machine
License  on or before  December  28,  2005.  Upon  receipt of a  conditional  or
permanent license, the Authority would be required to pay a one-time $50 million
fee to the Commonwealth of Pennsylvania.

A minimum  of 1,500  slot  machines  are  required,  and a maximum of 3,000 slot
machines are permitted,  to be in operation  within 18 months of the issuance of
the slot machine  license.  Under  certain  circumstances,  the Authority may be
permitted to install up to a total of 5,000 slot machines.

On  June  22,  2005,  the   Pennsylvania   Supreme  Court   unanimously   upheld
substantially  all of the Pennsylvania Race Horse Development and Gaming Act, or
the  Pennsylvania  Gaming  Act.  Following  the  Pennsylvania   Supreme  Court's
decision, the PGCB has begun the process of issuing final licensing regulations.
Published  reports  indicate  that  the  PGCB is  expected  to  begin  approving
conditional Category One Slot Machine Licenses in June 2006.

On July 21,  2005,  the  Authority  announced  plans  for the  development  of a
proposed 400,000 square foot gaming and entertainment facility to be constructed
on the existing  grounds of Pocono Downs.  The plans  provide for  approximately
2,000 slot machines,  3 full-service  restaurants,  a 300 seat buffet,  a 15,000
square  foot  food  court,  several  bars and  lounges,  an 18,000  square  foot
nightclub,  a "Kid's Quest"  center,  20,000  square feet of retail  space,  new
parking facilities and an enhanced employee services area.

Construction  of the new facility  will begin upon the issuance of a conditional
Category One Slot Machine  License by the PGCB.  The new facility is expected to
open approximately 14 months from the beginning of construction.  Estimated cost
of construction for the new facility is between $140 million and $160 million.

In addition to the development of the new gaming and entertainment facility, the
Authority plans to make  significant  improvements and additions to the existing
Pocono Downs  Clubhouse  and  Grandstand,  including a new  simulcast  facility,
improvements to the Grandstand for the installation of approximately  1,000 slot
machines (upon receipt of a conditional Category One Slot Machine License) and a
new 10,000  square foot food court.  These  improvements  are  estimated to cost
approximately  $47.0  million.  Construction  began  in  September  2005  and is
estimated to be completed by the spring of 2006.

COWLITZ PROJECT. In July 2004, the Authority formed Mohegan  Ventures-Northwest,
LLC,  or Mohegan  Ventures-NW,  one of two members in  Salishan-Mohegan  LLC, or
Salishan-Mohegan.  Salishan-Mohegan was formed to participate in the development
and  management  of a casino to be located in Clark County,  Washington,  or the
Cowlitz Project.  The proposed casino will be owned by the Cowlitz Indian Tribe.
Both Mohegan Ventures-NW and Salishan-Mohegan were designated as the Authority's
unrestricted  subsidiaries,  which  are not  required  to be  guarantors  of the
Authority's debt obligations.

In September  2004,  Salishan-Mohegan  entered into  development  and management
agreements  with the Cowlitz Indian Tribe regarding the Cowlitz  Project.  Under
the  terms  of  the  development  agreement,  Salishan-Mohegan  administers  and
oversees the planning, designing, development,  construction, and furnishing, as
well as providing  assistance with the financing,  of the Cowlitz  Project.  The
development  agreement  provides  for  certain  development  fees of 3% of total
Project Costs,  as defined in the  development  agreement,  which are payable to
Mohegan   Ventures-NW  through   Salishan-Mohegan   pursuant  to  the  operating
agreement.  The management  agreement is for a period of seven years  commencing
with the opening of the  planned  casino,  during  which  Salishan-Mohegan  will
manage,  operate and  maintain  the planned  casino.  The  management  agreement
provides  for a  management  fee  of  24% of Net  Revenues,  as  defined  in the
management  agreement,  which  approximates  net income  earned from the Cowlitz
Project. Pursuant to the operating agreement,  management fees will be allocated
to  the  members  of  Salishan-Mohegan  based  on  their  respective  membership
percentages.   Development  of  the  Cowlitz   Project  is  subject  to  certain
governmental  and  regulatory   approvals,   including,   but  not  limited  to,
negotiating a gaming  compact with the State of Washington and the United States
Department  of the Interior  accepting  land into trust on behalf of the Cowlitz
Indian Tribe.  The  management  agreement is subject to approval by the National
Indian Gaming Commission, or the NIGC.

MENOMINEE  PROJECT.  In October  2004 the  Authority  entered  into a management
agreement with the Menominee Indian Tribe of Wisconsin,  or the Menominee Tribe,
and  the  Menominee  Kenosha  Gaming  Authority.  The  terms  of the  management
agreement  grant the  Authority the  exclusive  right and  obligation to manage,
operate and maintain a planned  casino and  destination  resort to be located in
Kenosha,  Wisconsin,  or the  Menominee  Project,  for a period  of seven  years
commencing  with the  opening  of the  planned  casino,  in  consideration  of a
management fee of 13.4% of Net Revenues, as defined in the management agreement,
which approximates net income earned from the Menominee Project.  The management
agreement is subject to approval by the NIGC.

The information  concerning Kerzner  International,  the Tribe and the Authority
has been derived from publicly filed information.

                                       12


<PAGE>

G. CONTACT INFORMATION; INTERNET ADDRESS

The  principal  executive  offices of the  Company  is  located at 914  Hartford
Turnpike,  Waterford,  Connecticut  06385  and its  telephone  number  is  (860)
442-4559.  The Company's internet address is  http://www.waterfordgroup.net.  In
light of the limited  trading market for the Company's  securities,  the Company
does not  currently  make its periodic and current  reports  available,  free of
charge,  on  its  website.  The  Company's  periodic  and  current  reports  are
available, however, free of charge, on the Commission's website, at www.sec.gov.
The Company  will  provide  electronic  or paper  copies of its filings  free of
charge upon request.

Item 2. PROPERTIES

The Company does not own or lease any real property.

Item 3. LEGAL PROCEEDINGS

On January 6, 1998, Leisure Resort Technology,  Inc.  ("Leisure") and defendants
Waterford Gaming,  L.L.C., Trading Cove Associates,  LMW Investments,  Inc., and
Slavik Suites,  Inc.  settled a prior lawsuit brought by Leisure.  In connection
with this settlement,  Leisure,  TCA, the Company,  LMW  Investments,  Inc., and
Slavik Suites, Inc. entered into a settlement and release agreement. Pursuant to
this settlement and release agreement,  the Company bought Leisure's  beneficial
interest in TCA.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred  to the  complex  litigation  docket and is  pending  in  Waterbury,
Connecticut.  The  complaint  alleged  breach of  fiduciary  duties,  fraudulent
non-disclosure,  violation of Connecticut  Statutes Section 42-110a, et seq. and
unjust  enrichment  in  connection  with  the  negotiation  by  certain  of  the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting.  The complaint  seeks  unspecified  legal and equitable
damages.

On  February  29,  2000,  Defendants  filed a Motion to Strike  and a Motion for
Summary Judgment, each with respect to all claims. The Court granted Defendants'
Motion to Strike in part and denied Defendants' Motion for Summary Judgment,  on
October 13, 2000.  The Court's order  dismissed the claim for an accounting  and
the claim under  Connecticut  Statutes Section  42-110a,  et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites,  Inc., Len Wolman and Mark Wolman.  In a decision dated August 6,
2001,  the Court  dismissed all claims  against LMW  Investments,  Inc.,  Slavik
Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants  answered the complaint.
In addition,  the Company and Trading Cove Associates asserted counterclaims for
breach of the  settlement  and  release  agreement  and  breach  of the  implied
covenant  of good faith  against  Leisure  and its  president,  Lee Tyrol.  In a
decision dated June 6, 2001, the Court dismissed the  counterclaims  against Lee
Tyrol.  Leisure  moved for summary  judgment  seeking  dismissal  of the counter
claims in full. This motion for summary judgment was denied on April 14, 2003.

Fact   discovery  is  completed.   On  April  15,  2004,  the  Company  and  its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard arguments on this Motion on June 23, 2004. In an August 4, 2004,
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to  each  of the  remaining  three  counts  of the  plaintiff's  complaint.  The
plaintiff  has appealed  this  decision.  On May 9, 2005,  the Supreme  Court of
Connecticut,  without  issuing any ruling on the  substantive  issues  raised by
plaintiff's appeal, transferred the appeal to itself. Oral argument was heard on
September  21, 2005. On January 23, 2006,  the Supreme Court  affirmed the trial
court's decision granting summary judgement in favor of the Defendants on all of
plaintiff's claims. Defendants' counterclaims against plaintiff remain pending.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the Company's  security  holders for a vote for the
fiscal year ended December 31, 2005.


                                       13


<PAGE>

                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Not applicable. The Company did not sell any of its equity securities during the
period covered by this report.

Item 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

<S>                  <C>            <C>             <C>            <C>            <C>
                                                     FOR THE YEAR ENDED
                           2005             2004            2003            2002            2001
                      --------------   --------------  --------------  --------------  -------------


Total expenses        $  (15,162,312)  $  (16,697,545) $  (24,751,861) $  (13,102,082) $ (13,579,600)

Interest and
  dividend income            327,064          117,608         123,634         534,012      1,330,711

Equity in income of
  Trading Cove
  Associates              32,441,918       30,503,631      28,519,860      24,601,380     18,823,461
                      --------------   --------------  --------------  --------------  -------------
Net income            $   17,606,670   $   13,923,694  $    3,891,633  $   12,033,310  $   6,574,572
                      ==============   ==============  ==============  ==============  =============


OTHER DATA
 Interest expense     $   12,410,198   $   13,588,087  $   19,481,783  $   11,080,139  $  11,560,994

 Net change in cash
   and cash
   equivalents        $      396,057   $     (320,320) $      233,470  $    1,087,653  $    (453,072)




                                                       YEAR-END STATUS
                           2005             2004            2003             2002           2001
                      --------------   --------------  --------------  --------------  -------------


Total current assets  $   10,653,624   $   10,750,950  $   11,523,049  $   15,010,697  $  29,769,455
 Trading Cove
   Associates-equity
   investment             17,406,115       17,052,615      16,965,487      11,972,338     10,639,562
 Beneficial
   Interest-Leisure
   Resort
   Technology, Inc.        3,406,069        3,784,059       4,162,049       4,540,039      4,918,029
 Deferred financing
   costs net of
   accumulated
   amortization            2,325,643        2,903,141       3,568,059       2,643,338      3,010,202
 Fixed assets, net
   of accumulated
   depreciation                  ---              ---             916          11,696         22,476
                      --------------   --------------  --------------  --------------  -------------
Total assets          $   33,791,451   $   34,490,765  $   36,219,560  $   34,178,108  $  48,359,724
                      ==============   ==============  ==============  ==============  =============
 Total current
   liabilities        $    3,653,206   $    3,728,147  $    4,038,332  $    3,133,192  $   3,400,556
 9.50% senior
   notes payable                 ---              ---             ---     108,007,000    115,434,000
 8.625% senior
   notes payable         129,562,000      140,761,000     153,088,000             ---            ---

                      --------------   --------------  --------------  --------------  -------------
 Total liabilities    $  133,215,206   $  144,489,147  $  157,126,332  $  111,140,192  $ 118,834,556
                      --------------   --------------  --------------  --------------  -------------
 Member's
   deficiency         $  (99,423,755)  $ (109,998,382) $ (120,906,772) $  (76,962,084) $ (70,474,832)
                      ==============   ==============  ==============  ==============  =============

</TABLE>


                                       14


<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS/

The following discussion should be read in conjunction with, and is qualified in
its  entirety  by, the  Company's  financial  statements  and the notes  thereto
included elsewhere herein.

A - DEVELOPMENT AND OPERATIONAL ACTIVITIES

The  Company  was formed  solely for the  purpose  of  holding  its  partnership
interest  in Trading  Cove.  Trading  Cove is the former  manager  and  original
developer  of the Mohegan  Sun.  The  Company's  interest in Trading Cove is its
principal asset and source of income and cash flow.

B - CERTAIN RISK FACTORS

1 - LACK OF OPERATIONS;  DEPENDENCE ON THE MOHEGAN SUN - The Company is entirely
dependent  upon the  performance  of the  Mohegan  Sun to meet its debt  service
obligations.

The Company does not conduct any business  operations  other than in  connection
with its role as a general partner of Trading Cove, activities incidental to the
issuance of the 8.625% Senior Notes and the making of  restricted  and temporary
investments.  The Company is  prohibited by the terms of the 8.625% Senior Notes
Indenture from engaging in any other business activities. The Company intends to
fund its  operating  debt service and capital needs from cash flows from Trading
Cove and from cash flows (dividend and interest) from temporary investments.

Trading  Cove's  only  material   source  of  revenue  and  cash  flows  is  the
Relinquishment  Fees it receives from the  Authority.  There can be no assurance
that the Mohegan  Sun will  continue to  generate  sufficient  revenues  for the
Authority  to be  profitable  or to  service  its  debt  obligations,  or to pay
Relinquishment  Fees. The Company's  ability to meet its  obligations  under the
8.625% Senior Notes is entirely  dependent  upon the  performance of the Mohegan
Sun, which is subject to matters over which Trading Cove and the Company have no
control, including, without limitation,  general economic conditions, effects of
competition,  political,  regulatory  and other  factors,  the actual  number of
gaming customers and the amount wagered.

The  Company  cannot  assure  you that its  future  operating  cash flow will be
sufficient to cover its expenses, including interest on the 8.625% Senior Notes.

2 - LEVERAGE - The Company's and the Authority's substantial  indebtedness could
adversely  affect the  Company's  ability to fulfill its  obligations  under the
8.625% Senior Notes.

As of  December  31,  2005,  the  Company  has  an  aggregate  long-term  senior
indebtedness  of  $129,562,000,  consisting of the 8.625% Senior Notes. On March
15, 2006,  $6,477,000 of principal amount of 8.625% Senior Notes was redeemed at
the redemption  price of 106.596% of the principal  amount being  redeemed.  The
Authority is also highly leveraged. As of December 31, 2005, the Authority had a
total of approximately $1.244 billion of indebtedness outstanding.

The  degree  to  which  the  Authority  is  leveraged  could  have   significant
consequences  for the holders of the 8.625%  Senior  Notes,  including,  without
limitation, the following:

a) making it more  difficult  for the  Authority to pay the fees owed to Trading
Cove under the Relinquishment Agreement; and

b) the Authority's high degree of leverage may make it vulnerable to an economic
downturn,  which may hamper the Mohegan Sun's ability to meet expected operating
results.

3 - SUBORDINATION - Trading Cove's right to receive the relinquishment  payments
from the Authority is junior to certain payments by the Authority to the Mohegan
Tribe and holders of its indebtedness.

The senior and junior relinquishment payments from the Authority to Trading Cove
rank  behind all of the  Authority's  obligations  to pay the  minimum  priority
distributions  to the  Mohegan  Tribe and all of the  Authority's  existing  and
future senior secured indebtedness.

As a result,  upon any  distribution  by the  Authority  to its  creditors  in a
bankruptcy,  liquidation,  reorganization or similar proceeding  relating to the
Authority or its property,  the priority distributions owed to the Mohegan Tribe
and the holders of the Authority's senior secured  indebtedness will be entitled
to be paid in full  and in cash  before  any  senior  or  junior  relinquishment
payments may be made to Trading  Cove.  In addition,  the junior  relinquishment
payments  rank  behind  all  of  the  Authority's  existing  and  future  senior
indebtedness.  As a  result,  in  any  such  proceedings,  the  holders  of  the
Authority's senior  indebtedness will be entitled to be paid in full and in cash
before any junior relinquishment payments may be made to Trading Cove.



                                       15

<PAGE>

In  addition,  all  relinquishment  payments  will be  blocked in the event of a
payment default on senior secured indebtedness of the Authority,  and all junior
relinquishment  payments  will be blocked  in the event of a payment  default on
senior indebtedness of the Authority and, in each case, may be blocked for up to
179 of 360  consecutive  days in the event of certain  non-payment  defaults  on
senior  secured  indebtedness  or  senior  indebtedness  of  the  Authority,  as
applicable.

In the event of a bankruptcy, liquidation,  reorganization or similar proceeding
relating to the Authority,  Trading Cove will receive  distributions (if at all)
on a pari passu basis with all other holders of the Authority's senior unsecured
indebtedness with respect to the senior relinquishment  payments from the assets
remaining  after the Authority has paid all of its senior  secured  indebtedness
and with all other  holders of  subordinated  indebtedness  with  respect to the
junior relinquishment payments from the assets remaining after the Authority has
paid all of its  senior  indebtedness.  However,  the  Relinquishment  Agreement
requires  that amounts  otherwise  payable to Trading  Cove in a  bankruptcy  or
similar  proceeding  of the  Authority  be paid to  holders  of  senior  secured
indebtedness, with respect to the senior and junior relinquishment payments, and
to  holders  of senior  indebtedness,  with  respect  to  junior  relinquishment
payments,  until they are paid in full,  instead of to  Trading  Cove.  For that
reason, Trading Cove may receive less, ratably, than holders of senior unsecured
indebtedness and junior indebtedness of the Authority in any such proceeding. In
any of these cases,  the Authority may not have  sufficient  funds to pay all of
its creditors and Trading Cove may receive  less,  ratably,  than the holders of
the Authority's senior indebtedness.

For the year ending September 30, 2005, the annual minimum priority distribution
to the Mohegan Tribe was $15.8 million.  The minimum  priority  distribution  is
adjusted  annually to reflect the  cumulative  increase  in the  consumer  price
index.

The Authority will be permitted to borrow substantial  additional  indebtedness,
including senior secured indebtedness, in the future.

4 - RISKS  ASSOCIATED  WITH  TRADING  COVE  AND  THE  TRADING  COVE  PARTNERSHIP
AGREEMENT  - The Company  would not be a creditor of Trading  Cove and it has no
rights to the assets of the  Authority in the event of a  bankruptcy  or similar
proceeding  against either  Trading Cove or the Authority.  The Company does not
have the power under the TCA Partnership Agreement to cause Trading Cove to make
any distributions to the Company.

If Trading Cove becomes the debtor in a bankruptcy  or similar  proceeding,  the
Company would have the status of an equity holder, not a creditor, and would not
be entitled to receive any  distributions  until all of Trading Cove's creditors
were paid in full.

If the  Authority  became the  debtor in a  bankruptcy  or  similar  proceeding,
Trading Cove's rights and recovery would depend on numerous  factors,  including
the type and outcome of the proceeding.  If the Authority ceased  operations and
liquidated,  under Chapter 7 of the Bankruptcy Code or otherwise, Trading Cove's
claim would likely be limited to the amount of unpaid  Relinquishment Fees as of
the time of liquidation.  If the Authority  reorganized  under Chapter 11 of the
Bankruptcy  Code,  Trading  Cove's claim would likely be based on an estimate of
the Mohegan Sun's future revenues for the term of the Relinquishment  Agreement.
In any event,  any  recovery by Trading  Cove on its claims for senior or junior
relinquishment  fees  would  be  subject  to the  prior  payment  in full of all
indebtedness senior thereto.

As a  result,  the  Company  cannot  give any  assurance  that,  in the event of
bankruptcy or financial  difficulty of either Trading Cove or the Authority,  it
would ultimately  recover  sufficient (or any) funds to pay amounts  outstanding
under the 8.625% Senior Notes.

The 8.625%  Senior  Notes are not  collateralized  by a pledge of the  Company's
partnership  interest  in  Trading  Cove.  Accordingly,   in  the  event  of  an
acceleration  under the 8.625%  Senior Notes  Indenture,  the trustee  under the
8.625% Senior Notes  Indenture  will not be able to foreclose upon the equity in
Trading Cove.

The TCA Partnership Agreement requires consent by both partners in order to take
any action.  Accordingly,  neither the Company nor Kerzner  Investments  has the
authority  to  cause  Trading  Cove  to  make  any  distributions,  and  Kerzner
Investments has the ability to block any action taken by Trading Cove.  Although
the TCA Partnership  Agreement  requires  Trading Cove to make  distributions of
excess cash, the distributions are reduced by certain  undefined,  discretionary
amounts,  including  foreseeable  needs of cash,  obligations  to third parties,
adequate  working  capital and reserves and the amount needed by the partnership
to conduct  its  business  and carry out its  purposes.  A dispute  between  the
partners as to the appropriate  amount of such reductions  could result in no or
limited  distributions  by Trading  Cove,  which  could have a material  adverse
effect on the Company's ability to make required payments of interest, principal
and premium on the 8.625% Senior Notes.

Under the TCA  Partnership  Agreement  and certain  other  existing  agreements,
Trading  Cove  must  pay  expenses  and  make  certain   payments  and  priority
distributions  prior to making  distributions  to the  Company.  Such  expenses,
payments and priority distributions include,

(1) operating  expenses and to the extent operating  expenses are less than $2.0
million annually,  payment of the difference to each of Kerzner  Investments and
the principals of the Company;


                                       16
<PAGE>

(2) the development fee to be paid to Kerzner Investments, Construction, and The
Slavik Company and related development expenses equal to 3% of the total cost of
the Project Sunburst expansion,  excluding  capitalized  interest,  less Trading
Cove's actual costs relating to the Project Sunburst  expansion  (Trading Cove's
accrued  liability to Kerzner  Investments  with respect to such fee at December
31, 2005 was approximately $384,000), and

(3) a $5.0 million  annual  payment to Kerzner  Investments,  payable  quarterly
until December 31, 2006.

5 - RISKS ASSOCIATED WITH THE BUY/SELL OPTION UNDER THE TRADING COVE PARTNERSHIP
AGREEMENT - If a dispute occurs between the Company and Kerzner Investments, the
buy/sell  provision of the TCA Partnership  Agreement  could be invoked.  If the
buy/sell provision is invoked,  the Company cannot assure you that it would have
sufficient  funds to buy out Kerzner  Investments  or, if the Company  agreed to
sell to Kerzner  Investments,  that the selling price would be sufficient to pay
all amounts due on the 8.625% Senior Notes.

In the event of any dispute between the partners in Trading Cove, either partner
could invoke the buy/sell provision contained in the TCA Partnership  Agreement.
Pursuant to the buy/sell  provision,  the party invoking the buy/sell  provision
would  deliver a notice to the other party  requiring it to sell its interest or
buy the invoking party's  interest,  in each case at the price set forth in such
notice.  The party receiving the notice must make the election within 45 days of
receipt of the notice or be deemed to have  accepted  the offer to sell.  If the
offer to buy is elected, the party must close the purchase within 75 days of the
end of the 45-day  period.  Any party may terminate the option at any time prior
to closing by accepting  the position of the other party.  In the event  Kerzner
Investments were to invoke the buy/sell provision, the Company could:

a) buy Kerzner Investments' interest;

b) sell its interest; or

c) agree with Kerzner Investments on the point of dispute.

The Company may transfer  its right to buy under the  buy/sell  provision of the
TCA Partnership Agreement to the Waterford Group or the Waterford Group may fund
the purchase of Kerzner Investments partnership interest. If the Company were to
elect to buy  Kerzner  Investments  partnership  interest  other than with funds
provided by the Waterford Group, the 8.625% Senior Notes Indenture  requires the
Company to redeem the 8.625% Senior Notes; however the Company cannot assure you
that it would be able to raise  funds  sufficient  for the Company to redeem the
8.625% Senior Notes on satisfactory terms, or at all.

If the Company  were to sell its  partnership  interest in Trading  Cove,  it is
possible that the amount the Company  receives would be  insufficient to pay all
amounts  due on the 8.625%  Senior  Notes.  If the  Company  were to concur with
Kerzner  Investments with respect to the point of dispute,  it cannot assure you
that Kerzner  Investments'  position would not have a material adverse effect on
the  Company's  ability to pay  principal,  interest  and  premium on the 8.625%
Senior Notes.

6 - DIFFICULTIES IN ENFORCING OBLIGATIONS AGAINST THE AUTHORITY - The ability to
enforce  obligations  against the  Authority and the Mohegan Tribe is limited by
the Mohegan Tribe's sovereign immunity.

Although the Mohegan Tribe and the Authority have sovereign immunity and may not
be sued without their  consent,  both the Mohegan  Tribe and the Authority  have
granted a limited waiver of sovereign immunity and consent to suit in connection
with the  Relinquishment  Agreement,  including  suits  against the Authority to
enforce the obligation to pay fees due under the  Relinquishment  Agreement.  In
the event that such  waiver of  sovereign  immunity  is held to be  ineffective,
Trading  Cove  could be  precluded  from  judicially  enforcing  its  rights and
remedies.  Generally,  waivers  of  sovereign  immunity  have  been  held  to be
enforceable  against Indian tribes such as the Mohegan Tribe.  In addition,  the
Company has no standing to enforce the  Relinquishment  Agreement  and therefore
would have to rely on Trading Cove to enforce such agreement.


                                       17
<PAGE>

The  Relinquishment  Agreement  provides that disputes  shall be resolved in any
court of  competent  jurisdiction  including  the Gaming  Disputes  Court of the
Mohegan Tribe,  which was established under the Mohegan Tribe's  constitution to
rule on disputes  with respect to the Mohegan Sun.  Appeals of the  decisions of
the Trial  Division  are heard by the  Appellate  Branch of the Gaming  Disputes
Court.  Matters as to which applicable federal or state courts have jurisdiction
may be  brought  in such  courts.  However,  the  federal  courts  may not  have
jurisdiction  over  disputes not arising under federal law, and the state courts
may not have jurisdiction over any disputes arising on the Mohegan  reservation.
Moreover,  the  federal  and state  courts,  under the  doctrines  of comity and
exhaustion of tribal remedies,  may be required to (1) defer to the jurisdiction
of the Gaming  Disputes  Court or (2)  require  that any  plaintiff  exhaust its
remedies in the Gaming  Disputes Court before bringing any action in the federal
or state court.  Thus, there may be no federal or state court forum with respect
to  a  dispute  with  the  Authority  or  the  Mohegan  Tribe  relating  to  the
Relinquishment  Agreement.  In addition, the Authority may not be subject to the
federal  bankruptcy  laws.  Thus, no assurance can be given that, if an event of
default occurs,  any forum will be available other than an arbitration  panel of
the Gaming Disputes  Court. In the Gaming Disputes Court,  there are few guiding
precedents  for the  interpretation  of Mohegan  Tribal law. Any  execution of a
judgment  of the Gaming  Disputes  Court will  require  the  cooperation  of the
Mohegan Tribe's  officials in the exercise of their police powers.  Thus, to the
extent that a judgment of the Gaming  Disputes Court must be executed on Mohegan
Tribal lands,  the practical  realization of any benefit of such a judgment will
be dependent upon the willingness and ability of the Mohegan Tribal officials to
carry out such judgment. In addition, the land under the Mohegan Sun is owned by
the United States in trust for the Mohegan Tribe, and creditors of the Authority
or the Mohegan Tribe may not force or obtain title to the land.

The Mohegan Tribe is permitted to amend the provisions of its constitution  that
establish  the  Authority  and the Gaming  Disputes  Court with the  approval of
two-thirds  of the  members  of the Tribal  Council  and a  ratifying  vote of a
two-thirds  majority of all of the members of the Mohegan  Tribe,  with at least
40% of the registered voters of the Mohegan Tribe voting.  However, prior to the
enactment of any such amendment by the Tribal Council, any non-tribal party will
have the  opportunity  to seek a ruling from the Appellate  Branch of the Gaming
Disputes Court that the proposed  amendment  would  constitute an  impermissible
impairment of contract.  Further, the Mohegan Tribe's constitution prohibits the
Mohegan  Tribe from  enacting  any law that  would  impair  the  obligations  of
contracts  entered  into  in  furtherance  of  the  development,   construction,
operation  and promotion of gaming on Mohegan  Tribal lands.  Amendments to this
provision of the Mohegan Tribe's  constitution  require the affirmative  vote of
75% of all  registered  voters of the Mohegan  Tribe.  Amendment  to any of such
provisions  of the  Mohegan  Tribe's  constitution  could  adversely  affect the
ability of Trading Cove to enforce the  obligations of the Authority,  which, in
turn would adversely affect the Company's ability to pay principal, interest and
premium on the 8.625% Senior Notes.

7 - FUTURE  EXPANSION  OF THE MOHEGAN SUN - In the event that the Mohegan  Tribe
decides to expand the Mohegan Sun,  Trading Cove has no rights  associated  with
such expansion.

The Mohegan Tribe may in the future decide to expand the Mohegan Sun.  Under the
terms of the  Relinquishment  Agreement,  Trading  Cove is entitled to 5% of all
revenues  derived  directly or  indirectly  from the Mohegan Sun,  including the
Project  Sunburst  expansion  but  excluding  revenues  derived  from any future
expansions  and from Class II gaming  activities.  If the Mohegan Sun is further
expanded, Trading Cove, under the terms of the Relinquishment Agreement will not
be entitled to any of the revenues generated by the incremental  expansion.  The
Relinquishment  Agreement  does not describe how the  Authority  would  allocate
which revenues were covered by the  Relinquishment  Agreement and which revenues
were not. In  addition,  Trading  Cove has no rights to act as  developer of any
such expansion.  The Company cannot assure you that any future  expansion of the
Mohegan Sun will not have a material adverse affect on the Authority,  including
by  disrupting  the current  operations  of the  Mohegan  Sun thereby  affecting
revenues and the Authority's ability to pay Relinquishment Fees to Trading Cove.
In addition,  the Company  cannot assure you that any future  expansion will not
draw guests to those  portions of the Mohegan Sun from which Trading Cove is not
entitled to a percentage of revenues, thereby impacting the Relinquishment Fees.
If the  Mohegan  Tribe were to take any action  that would  prejudice  or have a
material  adverse effect on the rights of Trading Cove under the  Relinquishment
Agreement,  Trading Cove could sue the Mohegan Tribe for breach of contract. The
Company  cannot  assure  you that  any such  lawsuit  would be  successful.  See
"Difficulties in Enforcing Obligations Against the Authority".

8 -  COMPETITION  FROM  OTHER  GAMING  OPERATIONS  -The  Mohegan  Sun  may  face
significant competition from other persons who may receive approval to engage in
gaming in the region.

                                       18
<PAGE>

The gaming industry is highly  competitive.  The Mohegan Sun currently  competes
primarily with Foxwoods Resort Casino ("Foxwoods") and, to a lesser extent, with
casinos in Atlantic City,  New Jersey and upstate New York.  Foxwoods is located
approximately 10 miles from the Mohegan Sun.

Currently,   other  than  Atlantic  City,  New  Jersey,  casino  gaming  in  the
Northeastern  United  States is conducted  only by federally  recognized  Indian
tribes operating under federal Indian gaming law. The New York State legislature
authorized  certain  limited  machine gaming at several race tracks in the state
but not full-scale  casino gaming.  To date,  three separate race tracks operate
approximately  6,000  machines.  Two  other  race  tracks  in New  York are each
authorized to install 5,000 machines for a total of 10,000 additional  machines.
The legislature  also authorized three Indian casinos in the Catskills region of
New York (Sullivan and Ulster  counties) and three casinos to be operated by the
Seneca Nation of Indians in the Niagara/Buffalo area. The Seneca Nation opened a
facility in Niagara Falls in late December 2002 and opened  another  facility in
Salamanca,  New York,  in early May 2004. A third  Seneca  casino is planned for
Buffalo. The State's highest court of appeals has recently affirmed the validity
of the New York State statute that governs  machine  gaming and gaming on Indian
lands.

In the Spring of 2005,  the  Governor of New York  entered  into five land claim
settlement  agreements  with  five  Indian  tribes.  Because  of  certain  court
decisions involving New York tribes, the agreements were allowed to lapse and it
is not clear at this time  whether the  Governor and the five tribes will revive
the agreements  that would,  among other things,  permit gaming by the tribes in
the  Catskill  Region of New York.  In the event this is  approved  and  federal
legislation  is also  enacted,  then there is the  likelihood  that  significant
competition for New York patrons will ensue.  The Catskills  region is about 185
miles from Mohegan Sun.

The Oneida Indian  Nation  operates  Turning Stone Casino Resort in Verona,  New
York,  approximately  270 miles from the Mohegan Sun. The St. Regis Mohawk Tribe
in Hogansburg,  New York has entered into a gaming compact with the State of New
York to conduct gaming on its reservation near the Canadian border.

In  addition,  several  other  federally  recognized  tribes in New  England are
seeking to establish  gaming  operations.  These  include the  Historic  Eastern
Pequot Tribe of Connecticut and the  Schaghticoke  Tribal Nation of Connecticut.
The Bureau of Indian Affairs issued final revised  negative  determinations  for
both tribes.  They have each appealed the decisions and a long judicial  process
will likely  ensue.  In addition the  Narragansett  Tribe of Rhode  Island,  the
Aquinnah  Wampanoag Tribe (Gay Head) of Massachusetts and all four of the tribes
in the State of Maine:  the  Penobscot,  Passamaquoddy,  Houlton Band and Micmac
Tribes continue to explore gaming opportunities. A 2004 state wide referendum in
Maine rejected any off-reservation Indian casino gaming.

In Rhode Island,  a gaming  expansion bill has recently been introduced into the
Rhode Island House of  Representatives,  the approval of which would result in a
November  2006  voter  referendum  on a  West  Warwick  casino  operated  by the
Narragansett  Tribe  and an  undisclosed  partner.  Also,  in Rhode  Island,  an
affiliate of the Company,  BLB Investors,  LLC recently  purchased the greyhound
race track in Lincoln,  RI,  about 63 miles from the Mohegan  Sun.  The facility
currently  operates  3,602  VLTs and the State has  agreed  to  placement  of an
additional 1,150 devices. The facility is undergoing renovation and all VLTs are
scheduled  to be  operational  in the first  quarter of 2007.  The extent of the
impact of the additional devices on revenues at Mohegan Sun is unknown.

There are several other groups in New England  seeking  federal  recognition  as
tribes.  If successful,  these groups will most likely seek to establish  casino
operations.  In Massachusetts,  one such group is the Mashpee Wampanoag which is
awaiting a proposed finding.

A number  of states in the  region  are  projecting  budget  shortfalls  and are
considering  permitting forms of gaming to provide state revenues.  In an effort
to address its state budget shortfalls,  the Governor of Massachusetts and other
leaders  in that  state  have  indicated  interest  in both  Indian  gaming  and
non-Indian  commercial  gaming.  State officials in Pennsylvania  are reportedly
considering  authorization of commercial casino gaming activities in that State.
Because of the close  proximity  of many areas of  Pennsylvania  to the New York
City metropolitan area, gaming in those areas would mean competition for Mohegan
patrons from New York City.

The Mohegan Sun also competes with other forms of gaming, including on-track and
off-track  wagering,  state  lotteries  and  Internet  gaming,  as  well as with
non-gaming leisure activities.


                                       19

<PAGE>

9 - Effect of General  Economic  Conditions - The U.S. economy is experiencing a
downturn, which could have an adverse impact on the financial performance of the
Mohegan Sun.

10 - Dependence on Key Personnel;  significant change in Tribal Management - The
loss of any key management member or any significant change in the makeup of the
Tribal Council could have a material adverse effect on the Mohegan Sun.

The Mohegan  Sun's  success  depends in large part on the  continued  service of
certain key management personnel,  particularly William Velardo, the Authority's
President  and Chief  Executive  Officer,  Mitchell  Etess,  the  Mohegan  Sun's
President  and Chief  Executive  Officer,  Jeffrey  Hartmann,  the Mohegan Sun's
Executive  Vice President and Chief  Operating  Officer,  and Leo Chupaska,  the
Authority's Chief Financial Officer.  The loss of the services of one or more of
these individuals or other key personnel could have a material adverse effect on
the Authority's  business,  operating results and financial  condition which, in
turn, would have a material adverse effect on the Company's  ability to meet its
obligations under the 8.625% Senior Notes.

The Authority is governed by a nine-member  Management  Board  consisting of the
nine members of the Mohegan  Tribal  Council (the  governing body of the Mohegan
Tribe). Any change in the composition of the Mohegan Tribal Council results in a
corresponding change in the Authority's Management Board.

On August 28, 2005, the Mohegan Tribe  announced the results of an election held
that day where all nine seats on the Mohegan  Tribal  Council were  chosen.  The
terms of the newly elected Mohegan Tribal Council members  commenced  October 3,
2005. The change in the composition of the members of the Mohegan Tribal Council
could have a material adverse effect on the Authority which, in turn, would have
a material adverse effect on the Company's ability to meet its obligations under
the 8.625% Senior Notes.

11 - Highly  Regulated  Industry  -  Changes  in the law could  have a  material
adverse effect on the Authority's ability to conduct gaming.

Gaming on the Mohegan Tribe's  reservation is extensively  regulated by federal,
state and  tribal  regulatory  bodies,  including  the  National  Indian  Gaming
Commission and agencies of the State of Connecticut  (for example,  the Division
of Special Revenue,  the State Police and the Department of Liquor Control).  As
is the case with any casino,  changes in applicable laws and  regulations  could
limit or  materially  affect the types of gaming that the  Authority can conduct
and the revenues they realize.  Congress has  regulatory  authority  over Indian
affairs  and can  establish  and change the terms upon which  Indian  tribes may
conduct  gaming.  Currently,  the  operation  of all  gaming on Indian  lands is
subject to the Indian Gaming Regulatory Act of 1988. For the past several years,
legislation  has been  introduced  in  Congress  with the intent of  modifying a
variety of perceived  problems with the Indian Gaming  Regulatory Act.  However,
none  of the  substantive  proposed  adverse  amendments  to the  Indian  Gaming
Regulatory Act have proceeded out of committee  hearings to a vote by either the
House or the Senate.


                                       20

<PAGE>
In the event that Congress passes prohibitory  legislation that does not include
any grandfathering exemption for existing tribal gaming operations,  and if such
legislation is sustained in the courts against tribal challenge, the Authority's
ability to meet its  obligations  to  creditors,  such as Trading Cove under the
Relinquishment  Agreement,  would be doubtful.  If the Authority  were unable to
meet its  obligations,  it would have a material adverse effect on the Company's
ability to make  payments  of  principal,  interest  and  premiums on the 8.625%
Senior Notes.

Under  federal law,  gaming on Indian land is  dependent  on the  permissibility
under state law of certain forms of gaming or similar  activities.  If the State
of  Connecticut  were to make various forms of gaming  illegal or against public
policy,  such action may have an adverse  effect on the ability of the Authority
to conduct  gaming.  In fact,  the State of  Connecticut  repealed the Las Vegas
Casino Nights statute in 2003,  but the state  attorney  general has opined that
this will not affect the two existing Indian gaming compacts.

12 -  Possible  Environmental  Liabilities  - Risks  of  material  environmental
liability  may exist as a result of  possibly  incomplete  remediation  of known
environmental hazards and the existence of unknown environmental hazards.

The site on which the  Mohegan Sun is located  was  formerly  occupied by United
Nuclear  Corporation,  a naval  products  manufacturer  of, among other  things,
nuclear reactor fuel components.  Prior to the decommissioning of United Nuclear
Corporation  facilities on the site, extensive remediation of contaminated soils
and additional  investigations were completed.  The site currently meets federal
and state remediation  requirements.  Notwithstanding the foregoing, the Company
cannot assure you that:

a) the various environmental reports or any other existing environmental studies
revealed all environmental liabilities;

b) any  prior  owners or  tenants  did not  create  any  material  environmental
condition not known to the Company;

c)  future  laws,  ordinances  or  regulations  will  not  impose  any  material
environmental liability; or

d) a material environmental condition does not otherwise exist on the site.

13 - Taxation of Indian Gaming - A change in the Authority's  current tax-exempt
status could have a material  adverse effect on the Authority's  ability to make
capital improvements and repay its indebtedness.

Based on  current  interpretations  of the  Internal  Revenue  Code of 1986,  as
amended (the  "Code"),  neither the Mohegan Tribe nor the Authority is a taxable
entity for purposes of federal income  taxation.  There can be no assurance that
Congress will not reverse or modify the non-tax status of Indian Tribes.

Efforts were made in Congress in the  mid-1990s to amend the Code to provide for
taxation of the net income of tribal  business  entities.  These have included a
House bill  which  would have taxed  gaming  income  earned by Indian  tribes as
unrelated  business income subject to corporate tax rates.  This legislation was
not enacted.  However,  tax reform is being considered in the 109th Congress and
some  leading  proposals  include  taxation  of  gaming  proceeds.  If  enacted,
legislation in this area could  materially and adversely  affect the Authority's
ability to make capital  improvements and repay its indebtedness which, in turn,
would  have a  material  adverse  effect on the  Company's  ability  to meet its
obligations under the 8.625% Senior Notes.


                                       21

<PAGE>
C - SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and  assumptions  that affect the amounts of assets and liabilities at
the  date  of the  financial  statements,  as well as the  reported  amounts  of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

In the  opinion  of  management,  the  Company  does  not  have  any  individual
accounting  policy  that  is  critical  in  the  preparation  of  its  financial
statements.  This is due to the  definitive  nature of the business in which the
Company is engaged.  Also,  in many cases,  the Company  must use an  accounting
policy or  method  because  it is the only  policy  or  method  permitted  under
accounting principles generally accepted in the United States of America.

The  following  is a review  of the more  significant  accounting  policies  and
methods used by the Company:

1 -  CONCENTRATION  OF  CREDIT  RISK  - The  Company's  interest  in  TCA is its
principal  asset and  source of income and cash flow.  The  Company  anticipates
regular distributions from TCA based upon the operating results of the Authority
and the related Relinquishment Fees paid and to be paid by the Authority.

2 - EQUITY INVESTMENTS - The Company's equity investment in TCA is accounted for
utilizing the equity  method.  Included in the  investment is the purchase price
paid to a corporation  for its 12.50%  interest in TCA. This amount is amortized
on a  straight  line  basis  over  a 189  month  period.  The  Company  receives
distributions  from TCA in  accordance  with an  Amended  and  Restated  Omnibus
Termination  Agreement.  The amount of distributions relies upon the fees earned
and cash  received by TCA  pursuant  to the  Relinquishment  Agreement  with the
Authority. Distributions are recorded when received.

D - TABLE OF CONTRACTUAL OBLIGATIONS

The following table provides an overview of the Company's aggregate  contractual
obligations as of the latest fiscal year end balance sheet date.

<TABLE>
<CAPTION>

<S>                                         <C>                <C>             <C>              <C>            <C>
CONTRACTUAL OBLIGATIONS                                                    PAYMENTS DUE BY PERIOD
-----------------------                                                    ----------------------
                                                                LESS THAN 1                                      MORE THAN
                                                TOTAL              YEAR          1-3 YEARS       3-5 YEARS        5 YEARS
                                             -------------     ------------    ------------     ------------   -------------
Long-Term Debt
    Obligations(1).................          $ 207,785,054     $ 11,174,722    $ 22,349,444     $ 22,349,444   $ 151,911,444
Capital Lease
    Obligations....................                      0                0               0                0               0
Operating Lease
     Obligations ..................                      0                0               0                0               0
Purchase Obligations ..............                      0                0               0                0               0
Other Long-Term
    Liabilities on the
      Registrant's Balance
        Sheet under GAAP ..........                      0                0               0                0               0
                                             -------------     ------------    ------------     ------------   -------------
Total (1)..........................          $ 207,785,054     $ 11,174,722    $ 22,349,444     $ 22,349,444   $ 151,911,444
                                             =============     ============    ============     ============   =============

</TABLE>

(1)  As  of  December  31,  2005,  the  Company's  long-term  debt  consists  of
obligations under its 8.625% Senior Notes. As of March 15, 2006, $123,085,000 in
aggregate  principal  amount of 8.625% Senior Notes is outstanding.  At December
31,  2005,  the  Company  had an  aggregate  long-term  senior  indebtedness  of
$129,562,000. On March 15, 2006, $6,477,000 of principal amount of 8.625% Senior
Notes was redeemed at the redemption  price of 106.596% of the principal  amount
being redeemed.  Interest on the outstanding  principal  amount of 8.625% Senior
Notes is  payable  by the  Company  semi-annually  in  arrears on March 15th and
September 15th at a rate of 8.625% per annum.  The outstanding  principal amount
of 8.625%  Senior  Notes is due and payable in full on September  15,  2012.  In
addition to making  payments of  principal  and  interest  as  described  in the
preceding sentences,  on March 15th and September 15th of each year, the Company
and Finance must redeem their 8.625% Senior Notes with any "Company Excess Cash"
(as  defined  in the  8.625%  Senior  Notes  Indenture)  at a  redemption  price
expressed as a percentage of the principal amount of notes being redeemed.  Such
redemption  price declines  annually from 108.625% for redemptions  made between
September 15, 2003 and September  14, 2004, to 100% for  redemptions  made after
September 14, 2012. Any reduction in principal amount of the 8.625% Senior Notes
with Company Excess Cash will lower the interest payments payable by the Company
in subsequent periods.

OFF-BALANCE SHEET ARRANGEMENTS
------------------------------

The Company does not have any off-balance  sheet  arrangements  that have or are
reasonably likely to have a current or future effect on the Company's  financial
condition,  changes in financial  condition,  revenues or  expenses,  results of
operations, liquidity, capital expenditures or capital resources.

                                       22

<PAGE>

E - OVERVIEW OF CURRENT AND FUTURE CASH FLOWS

The Company  expects to fund its operating,  debt service and capital needs from
cash flows from the  Company's  distributions  from TCA, and from the  Company's
available  cash.  Based  upon  the  Company's   anticipated  future  operations,
management  believes  that  available  cash flow will be  sufficient to meet the
Company's  anticipated  requirements  for  future  operating  expenses,   future
scheduled  payments of  principal  and  interest on the 8.625%  Senior Notes and
additional  investments  in TCA  that may be  required  in  connection  with the
Project Sunburst expansion.  No assurance,  however, can be given that operating
cash flows will be sufficient for that purpose.

1 - SOURCES OF INCOME AND CASH FLOWS

The Company has one primary  source of income and cash flow:  equity  income and
distributions from TCA. The Company  anticipates regular payments from TCA based
on the  results of the  Mohegan  Sun and  Relinquishment  Fees  payments  by the
Authority to TCA.

2 - PAYMENTS OF DISTRIBUTIONS ON THE COMPANY'S PARTNERSHIP INTEREST IN TCA

On April 26, 2005, the Company received $3,296,493, on July 26, 2005 the Company
received $12,375,000,  on October 26, 2005 the Company received $3,969,521,  and
on January 26, 2006 the Company received  $13,163,715 from TCA as distributions,
which  represents  the  Company's  share under the Amended and Restated  Omnibus
Termination Agreement of approximately $72,964,000 in Relinquishment Fees earned
by TCA pursuant to the  Relinquishment  Agreement for the year January 1 through
December 31, 2005.

On April 27,  2004,  on July 27,  2004,  on October  26, 2004 and on January 26,
2005, the Company received $2,620,000,  $11,925,000, $4,073,386 and $12,447,404,
respectively,  from TCA as  distributions,  which represents the Company's share
under the Amended and Restated  Omnibus  Termination  Agreement of approximately
$69,001,000 in Relinquishment  Fees earned by TCA pursuant to the Relinquishment
Agreement for the year January 1 through December 31, 2004.

F - RESULTS OF OPERATIONS

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004

Total  expenses for the twelve months ended  December 31, 2005 were  $15,162,312
compared with  $16,697,545  for the twelve months ended  December 31, 2004.  (a)
Interest expense decreased by $1,177,889 and amortization on deferred  financing
costs  decreased by $87,420 due primarily to the redemption of the 8.625% Senior
Notes in the principal  amounts of $5,600,000  and  $5,599,000 on March 15, 2005
and September 15, 2005, respectively,  (b) salaries-related parties increased by
$200,011  due to (i) the  increase  in  Revenues  of the  Mohegan  Sun and  (ii)
effective  January  1,  2004 the  incentive  compensation  in  terms of Mr.  Len
Wolman's employment  agreement changed from a fixed 0.05% of the Revenues of the
Mohegan Sun to an amount that ranges from 0.00% to 0.10% of the  revenues of the
Mohegan  Sun  (for  the  years  ended  December  31,  2005  and  2004  incentive
compensation was calculated at 0.08% and 0.07%, respectively, of the Revenues of
the Mohegan Sun) and (c) general and administrative  costs decreased by $469,019
(primarily attributable to a decrease in legal and other expenses related to the
defense  of the  Leisure  litigation  as  described  in  Part  I:  Item 3  LEGAL
PROCEEDINGS, of approximately $470,200).

Equity in income of Trading Cove Associates for the year ended December 31, 2005
was $32,441,918  compared with $30,503,631 for the year ended December 31, 2004.
The Company has included amortization of purchased interests of $440,028 in each
year's equity income. The Company's share of TCA's results fluctuates based upon
revenues earned by TCA under the Relinquishment Agreement. In addition, interest
and divided income increased by $209,456.

As a result of the  foregoing  factors,  the Company  experienced  net income of
$17,606,670  for the year ended  December 31, 2005,  compared with net income of
$13,923,694 for the year ended December 31, 2004.

                                       23
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 2004 AND 2003

Total  expenses for the twelve months ended  December 31, 2004 were  $16,697,545
compared with  $24,751,861  for the twelve months ended  December 31, 2003.  (a)
Interest expense decreased by $5,893,696 and amortization on deferred  financing
costs  decreased by  $2,253,392  due  primarily to the  redemption  of the 9.50%
Senior Notes in the  principal  amount of  $102,349,000  and the issuance of the
8.625%  Senior Notes in the principal  amount of $155 million in June 2003,  (b)
salaries-related  parties  increased  by  $316,422  due to (i) the  increase  in
Revenues  of the Mohegan Sun and (ii)  effective  January 1, 2004 the  incentive
compensation in terms of Mr. Len Wolman's  employment  agreement  changed from a
fixed  0.05% of the  revenues  of the  Mohegan Sun to an amount that ranges from
0.00% to 0.10% of the  revenues of the Mohegan Sun (for the year ended  December
31, 2004, incentive  compensation was calculated at 0.07% of the revenues of the
Mohegan  Sun) and (c) general and  administrative  costs  increased  by $295,628
(primarily  attributable to (i) an increase in legal and other expenses  related
to the defense of the Leisure  litigation  as  described in PART I: Item 3 LEGAL
PROCEEDINGS, of approximately $303,300, (ii) by an increase in insurance expense
of  approximately  $5,900,  (iii) by an  increase  in other  legal  expenses  of
approximately  $7,300,  (iv) by an  increase in payroll  taxes of  approximately
$4,300  and  offset  by  (v)  a  decrease  in  Commission   filing  expenses  of
approximately  $8,700 and (vi) by a decrease in accounting fees of approximately
$14,500), (d) 9.50% senior notes tender expense decreased by $509,414 due to the
redemption of the 9.50% Senior Notes in June 2003 and (e) depreciation decreased
by $9,864.

Equity in income of Trading Cove Associates for the year ended December 31, 2004
was $30,503,631  compared with $28,519,860 for the year ended December 31, 2003.
The Company has included amortization of purchased interests of $440,028 in each
year's equity income. The Company's share of TCA's results fluctuates based upon
revenues earned by TCA under the Relinquishment Agreement. In addition, interest
and dividend income decreased by $6,026.

As a result of the  foregoing  factors,  the Company  experienced  net income of
$13,923,694  for the year ended  December 31, 2004,  compared with net income of
$3,891,633 for the year ended December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

The initial capital of the Company consists of the partnership  interests in TCA
contributed  by Slavik  Suites,  Inc. and LMW  Investments,  Inc. in forming the
Company. In connection with the offering of the 12.75% Senior Notes, the Company
used approximately  $25.1 million to purchase from Kerzner  International  $19.2
million in  principal  amount of Authority  subordinated  notes plus accrued and
unpaid interest and subordinated notes fee amounts. In addition, TCA distributed
approximately  $850,000 in principal amount of Authority  subordinated  notes to
the Company.  In addition,  the Company used approximately  $10.6 million of the
proceeds  from the 12.75%  Senior  Notes to  purchase  RJH  Development  Corp.'s
interests in TCA.


During  September 1997 and on October 12, 1998 and 1999,  the Company  purchased
from  Kerzner  International  $2.5  million  Authority  subordinated  notes plus
accrued and unpaid  interest and  completion  guarantee fee amounts  (total cost
approximately $2.8 million for each transaction).

On January 6, 1998 the Company paid $5 million to Leisure  whereby  Leisure gave
up its beneficial  interest of 5% of the  organizational  and administrative fee
and excess cash of TCA and any other claims it may have had against the Company,
TCA and TCA's partners and former partner.

In  connection  with the  offering of the 9.50% Senior  Notes,  the Company used
approximately  $72 million to repurchase  the 12.75%  Senior Notes,  distributed
approximately $37 million to its new parent, Waterford Group, and paid the final
$2 million to Leisure.

On  December  30,  1999,  the  Authority  paid to the  holders of the  Authority
subordinated  notes,  an amount to satisfy  all  obligations  of such  Authority
subordinated  notes.  The Company received  $44,403,517  from the Authority.  On
December 30, 1999,  TCA  distributed  $10,536,543  to its partners.  The Company
received $5,268,272.

On  January  4, 2000 in  accordance  with the terms of the  9.50%  Senior  Notes
indenture,  dated as of March 17,  1999  between the  Company  and  Finance,  as
issuers,  and State Street Bank and Trust Company, as trustee,  and the Security
and  Control  Agreement,  dated as of March 17,  1999  between  the  Company and
Finance and State Street Bank and Trust Company,  $15,000,000 was transferred to
restricted investments.

On January 4, 2000 also in  accordance  with the terms of the 9.50% Senior Notes
indenture, the Company distributed $34,671,789 to its member Waterford Group.

On November 1, 2002, the Company distributed  $15,000,000 to Waterford Group, as
a Permitted  Dividend,  in  accordance  with the terms of the 9.50% Senior Notes
indenture.

In connection  with the offering of the 8.625%  Senior  Notes,  the Company used
approximately   $111.8   million  to  repurchase  the  9.50%  Senior  Notes  and
distributed $44.5 million to Waterford Group.


                                       24


<PAGE>

Tax distributions  totaling  approximately  $21,262,000 were made by the Company
during 1999,  2000, 2001, 2002, 2003, 2004 and 2005 in accordance with the terms
of  the  applicable  indentures.  On  January  10,  2006 a tax  distribution  of
approximately $3,314,000 was made by the Company.

The Company  distributed the following  amounts to Waterford Group in accordance
with the terms of the 8.625% Senior Notes Indenture.

                Date of Distribution                    Amount Distributed
               ----------------------                  --------------------
                September 15, 2003                           $98,080

                March 15, 2004                              $349,247

                September 15, 2004                          $249,567

                March 15, 2005                              $294,585

                September 15, 2005                          $336,050

                March 15, 2006                              $382,832

Accordingly,  after taking into  consideration net income (loss) since inception
the Company has a member's deficit of approximately $99,424,000 and $109,998,000
at December 31, 2005 and 2004, respectively.

For the years ended  December 31, 2005 and 2004,  net cash provided by operating
activities  (as shown in the  Statements  of Cash  Flows)  was  $18,003,528  and
$14,425,391, respectively.

Current assets decreased from $10,750,950 at December 31, 2004 to $10,653,624 at
December 31, 2005. The decrease was primarily  attributable to (i) the scheduled
semi-annual  payment of interest on March 15, 2005 and September 15, 2005 on the
8.625% Senior Notes in the amounts of  approximately  $6,070,000 and $5,829,000,
respectively, (ii) by the redemption on March 15, 2005 of 8.625% Senior Notes in
the principal  amount of $5,600,000,  at the redemption price of 107.610% of the
principal  amount being redeemed,  (iii) by the redemption on September 15, 2005
of 8.625% Senior Notes in the principal amount of $5,599,000,  at the redemption
price of 106.596% of the principal amount being redeemed,  (iv) by distributions
to Waterford  Group on March 15, 2005 and  September  15, 2005 of  approximately
$294,600 and $336,100,  respectively  and (v) by tax  distributions to Waterford
Group on January 10, 2005,  April 11, 2005, June 10, 2005 and December 27, 2005,
of approximately $2,875,400, $11,100, $3,041,600 and $473,400, respectively, and
offset  by  (vi)  approximately   $18,003,500  of  cash  provided  by  operating
activities.

Current liabilities decreased from $3,728,147 at December 31, 2004 to $3,653,206
at December 31, 2005. The decrease was primarily  attributable to (i) a decrease
in accrued  interest on Senior Notes payable of  approximately  $284,400 (during
the year 2005,  8.625% Senior Notes in the principal  amount of $11,199,000 were
redeemed)  and offset by (ii) an  increase  in  accrued  expenses  and  accounts
payable of approximately  $209,500 primarily  attributable to (a) an increase in
amount due for  salaries-related  parties of approximately  $218,200,  (b) by an
increase in amounts due for  accounting  services  of  approximately  $9,800 and
offset by (c) a decrease in legal and other  expenses  related to the defense of
the Leisure Litigation,  as detailed under PART I: Item 3 LEGAL PROCEEDINGS,  of
approximately $11,600.

For the years ended  December  31, 2005 and 2004 net cash  provided by investing
activities (as shown in the Statements of Cash Flows) was $623,572 and $596,593,
respectively. The net cash provided by investing activities in 2005 and 2004 was
the result of net maturities and purchases of restricted investments.

                                       25


<PAGE>

The Company anticipates that no additional contributions will have to be made by
the Company to TCA (to fund certain of TCA's development  expenses in connection
with the Project Sunburst expansion at the Mohegan Sun). As of December 31, 2005
$5,000,000  had been  contributed by the Company to TCA to fund certain of TCA's
development  expenses in connection with the Project  Sunburst  expansion at the
Mohegan Sun.

For the  twelve  months  ended  December  31,  2005 and  2004,  net cash used in
financing  activities (as shown in the Statements of Cash Flows) was $18,231,043
and $15,342,304, respectively. The net cash used in financing activities in 2005
was primarily  the result of the  redemption of the 8.625% Senior Notes on March
15, 2005 and  September  15, 2005 in the  principal  amounts of  $5,600,000  and
$5,599,000, respectively, and by distributions to Waterford Group of $7,032,043.
The net cash used in financing  activities  in 2004 was  primarily the result of
the  redemption  of the 8.625%  Senior Notes on March 15, 2004 and September 15,
2004 in the principal amounts of $7,302,000 and $5,025,000, respectively, and by
distributions to Waterford Group of $3,015,304.

Pursuant to the terms of the 8.625% Senior Notes  Indenture,  if the Company and
Finance  have any Company  Excess  Cash,  as defined in the 8.625%  Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all  Required  IRA True-Up  Payments,  as defined in the 8.625%
Senior Notes Indenture, and less any amount set aside for the payment of accrued
and  unpaid  interest  on the  interest  payment  date that  corresponds  to the
redemption date for which the  determination is being made, to redeem the 8.625%
Senior Notes on the March 15th or September 15th following such dates.  Any such
redemption will be made at a price equal to a percentage of the principal amount
being redeemed.

The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company  Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the  Company  and  Finance  have  determined  was  available  for the  mandatory
redemption  of the 8.625%  Senior  Notes on February  1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture,  (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated,  and (d) the
redemption price at which such redemption was made.

<TABLE>
<S>                 <C>                        <C>                      <C>                    <C>

Date                Company Excess Cash        Principal Amount of      Dates of Redemption     Price (expressed as percentage of
                    (approximately)            notes redeemed                                   principal amount being redeemed
----------------    -------------------        -------------------      --------------------    ---------------------------------
August 1, 2003        $   5,568,000              $ 1,912,000             September 15, 2003                 108.625%
February 1, 2004      $  14,534,000              $ 7,302,000               March 15, 2004                   108.625%
August 1, 2004        $  11,695,000              $ 5,025,000             September 15, 2004                 107.610%
February 1, 2005      $  12,098,000              $ 5,600,000               March 15, 2005                   107.610%
August 1, 2005        $  11,798,000              $ 5,599,000             September 15,2005                  106.596%
February 1, 2006      $  12,492,000              $ 6,477,000               March 15, 2006                   106.596%

</TABLE>


The Company  expects to fund its operating,  debt service and capital needs from
cash flows from the Company's share of payments from TCA, and from the Company's
available  cash.  Based  upon  the  Company's   anticipated  future  operations,
management  believes  that  available  cash flow will be  sufficient to meet the
Company's  anticipated  requirements  for  future  operating  expenses,   future
scheduled  payments of  principal  and  interest on the 8.625%  Senior Notes and
additional  investments  in TCA  that may be  required  in  connection  with the
Project  Sunburst  expansion at the Mohegan Sun. No assurance,  however,  can be
given that the operating cash flow will be sufficient for that purpose.


                                       26
<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk  represents the risk of changes in value of a financial  instrument,
derivative or non-derivative,  caused by fluctuations in interest rates, foreign
exchange  rates  and  equity  prices.  Changes  in  these  factors  could  cause
fluctuations in earnings and cash flows.

For fixed rate debt,  changes in interest rates generally  affect the fair value
of the debt instrument, but not earnings or cash flows. Therefore, interest rate
risk  and  changes  in the  fair  value of fixed  rate  debt  should  not have a
significant  impact on earnings or cash flows until such debt is refinanced,  if
necessary.  For variable rate debt,  changes in interest rates  generally do not
impact the fair value of the debt instrument,  but do affect future earnings and
cash flows.  The  Company did not have any  variable  rate debt  outstanding  at
December 31, 2005 and 2004.  The fair value of the Company's  long-term  debt at
December  31, 2005 and 2004 is estimated to be  approximately  $137,984,000  and
$150,614,000,  respectively,  based on the  market  quotations  obtained  by the
Company.

The Company is exposed to market risks from  fluctuations  in interest rates and
the  effects  of those  fluctuations  on  market  values of the  Company's  cash
equivalents and restricted  investments.  Cash equivalents  generally consist of
overnight investments while the restricted  investments at December 31, 2005 are
principally   comprised  of  an  investment  in  a  Federal  National   Mortgage
Association Discount Note which was purchased at a discount of 3.68% and matured
March 8, 2006 and an investment in the First American Treasury Obligations Fund.
These investments are not significantly exposed to interest rate risk, except to
the extent that changes in interest rates will  ultimately  affect the amount of
interest income earned and cash flow from these investments.

The Company does not currently  have any  derivative  financial  instruments  in
place to manage interest costs, but that does not mean that the Company will not
use them as a means to manage interest rate risk in the future.

The  Company  does  not use  foreign  currency  exchange  forward  contracts  or
commodity  contracts  and  does  not  have  foreign  currency  exposure  in  its
operations.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's  financial  statements and notes thereto are filed as part of this
report and appear in this annual report on Form 10-K beginning on page 35.

Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

Item 9A.  CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that information  required to be disclosed in the Company's  Exchange Act
reports, is recorded, processed, summarized and reported within the time periods
specified  in the  Commission's  rules and forms  and that such  information  is
accumulated and  communicated to the Company's  management,  including its Chief
Executive  Officer and Chief Financial  Officer,  as  appropriate,  to allow for
timely decisions regarding required disclosure. In designing, and evaluating the
disclosure controls and procedures,  management recognizes that any controls and
procedures,  no  matter  how  well  designed  and  operated,  can  provide  only
reasonable  assurance of achieving  the desired  objectives,  and  management is
required to apply its judgment in evaluating  the cost benefit  relationship  of
possible controls and procedures.

As  required  by the  Commission  Rule  13a-15(b),  the  Company  carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including the Company's Chief  Executive  Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure  controls and procedures as of December 31, 2005. Based on
the  foregoing  evaluation,  the  Company's  Chief  Executive  Officer and Chief
Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures were effective.

(b)  Changes in Internal Controls

There has been no change  in the  Company's  internal  controls  over  financial
reporting during the Company's most recent quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal controls or
financial reporting.
                                       27


<PAGE>

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following tables sets forth certain  information with respect to persons who
are  members  of the Board of  Directors  of the  Company  or who are  Executive
Officers of the Company.

NAME                       AGE                     POSITION
----                       ---                     --------
Len Wolman                 51            Chairman of the Board and Chief
                                         Executive Officer
Alan Angel                 49            Chief Financial Officer
Del J. Lauria              57            Director and Secretary
Mark Wolman                48            Director
Stephan F. Slavik          59            Director
Richard Slavik             55            Vice President


LEN WOLMAN.  Mr. Len Wolman has been the Chairman of the Board of Directors  and
the Chief  Executive of the Company  since its  formation.  Since 1986,  Mr. Len
Wolman has been the Chairman of the Board of Directors  and the Chief  Executive
Officer of the  Waterford  Hotel  Group,  Inc.  Mr. Len Wolman is the  Company's
designated  representative to TCA under the TCA Partnership  Agreement.  Mr. Len
Wolman was  instrumental  in the formation of the  relationship  between Trading
Cove and the Mohegan Tribe and had been actively  working with the Mohegan Tribe
in connection  with obtaining  federal  recognition,  acquiring the site for the
Mohegan Sun and  obtaining  the  financing to construct the Mohegan Sun. Mr. Len
Wolman was actively  involved in the development,  construction and operation of
the Mohegan  Sun.  Mr. Len Wolman has served as  President  and Chief  Executive
Officer of Finance since its inception. Mr. Len Wolman is a Director and Officer
of Slavik,  one of the Waterford Group's members.  Mr. Len Wolman is the brother
of Mr. Mark Wolman. Mr. Len Wolman's wife and Mr. Angel's wife are sisters.

ALAN ANGEL.  Mr. Angel became Chief Financial  Officer of the Company in January
1999.  Since  1997,  Mr.  Angel has been the Chief  Financial  Officer of Mystic
Suites, L.L.C. Mystic Suites,  L.L.C. is a commercial  development firm based in
Eastern  Connecticut which currently holds an ownership  interest in a number of
hotels  managed by the  Waterford  Hotel  Group,  Inc.  Prior to joining  Mystic
Suites,  L.L.C., Mr. Angel resided in South Africa and served as Chief Financial
Officer of Rowan & Angel cc. Mr. Angel is a certified  public  accountant  and a
chartered accountant.  Mr. Angel has over 20 years of accounting experience. Mr.
Angel's wife and Mr. Len Wolman's wife are sisters.

DEL J.  LAURIA.  Mr.  Lauria  became a  Director,  Chief  Financial  Officer and
Secretary of the Company upon its  formation.  Mr. Lauria was succeeded as Chief
Financial  Officer in January  1999 by Mr.  Alan  Angel.  Mr.  Lauria is also an
Officer and Director of the Waterford  Hotel Group,  Inc. and is Executive  Vice
President   and  Director  of  Slavik.   Mr.  Lauria  first  joined  the  Slavik
Organization in 1980 as the Chief Financial  Officer of its real estate property
management  division.  The Slavik  Organization  is an affiliated  group of full
service real estate companies first  established in Michigan in the early 1950s.
Mr. Lauria  rapidly  advanced at the Slavik  Organization  and  currently  holds
various key managerial  positions  within the  enterprise.  Prior to joining the
Slavik  Organization,  Mr. Lauria was associated  with the  accounting  firm now
known as Deloitte & Touche and is a certified public accountant.  Mr. Lauria has
served as Treasurer and Secretary of Finance since its inception.

MARK  WOLMAN.  Mr.  Mark  Wolman  became  a  Director  of the  Company  upon its
formation.  Mr. Mark Wolman is the president of Wolman Homes, Inc. Wolman Homes,
Inc.  is a  commercial  development  and  construction  firm  based  in  Eastern
Connecticut.  Mr. Mark Wolman has been working with the Mohegan Tribe since 1992
and had been  instrumental  in assisting the Mohegan Tribe in obtaining a number
of governmental approvals in connection with the development and construction of
the Mohegan Sun. Mr. Mark Wolman is a Director of Slavik. Mr. Mark Wolman is the
brother of Mr. Len Wolman.

STEPHAN F. SLAVIK. Mr. Stephen Slavik was appointed a Director of the Company on
April 9, 2001.  Mr.  Stephen  Slavik is the  President of Michigan  based Slavik
Builders.  Mr. Stephen Slavik has over 30 years of experience with all phases of
land  planning,  product  design,  estimating  and site  construction  in single
family, multiple and commercial design/build developments. Mr. Stephen Slavik is
a Director and Vice  President of Slavik.  Mr.  Stephen Slavik is the brother of
Mr. Richard Slavik.

MR.  RICHARD  SLAVIK.  Mr.  Richard Slavik was appointed a Vice President of the
Company on April 9, 2001. Mr. Richard Slavik is Chief  Operating  Officer of the
Fourmidable  Group,  Inc., a Michigan  based real estate  management  firm.  Mr.
Richard  Slavik  has over 20  years of  constructing  and  operating  commercial
residential real estate  experience.  Mr. Richard Slavik is President of Slavik.
Mr. Richard Slavik is the brother of Mr. Stephan F. Slavik.

In light of the  Company's  limited  operations  and the fact that the Company's
interest in TCA is its principal  asset and source of income and cash flow,  the
Company has not adopted a code of ethics that applies to the Company's principal
executive officer,  principal financial officer, principal accounting officer or
controller, or persons performing similar functions.

                                       28


<PAGE>

Item 11. EXECUTIVE COMPENSATION

The following table  summarizes the  compensation  paid to the Directors and the
named Executive Officers of the Company.


NAME                      YEAR ENDED                SALARY
----                      ----------                ------
Len Wolman(i)                2005               $   1,417,431
                             2004               $   1,217,420
                             2003               $     900,998

Del Lauria                   2005               $        -
                             2004               $        -
                             2003               $        -

Stephan F. Slavik            2005               $        -
                             2004               $        -
                             2003               $        -

Mark Wolman                  2005               $        -
                             2004               $        -
                             2003               $        -

Alan Angel                   2005               $        -
                             2004               $        -
                             2003               $        -

Richard Slavik               2005               $        -
                             2004               $        -
                             2003               $        -

(i) As detailed in Item 13, Mr. Len Wolman has an  employment  contract with the
Company.  For the years ended  December  31,  2005,  2004 and 2003,  $1,417,431,
$1,217,420 and $900,998,  respectively,  was incurred by the Company pursuant to
the employment contract.

From January 1, 2000, the Company's Directors have also received compensation as
part of the  operating  expenses of TCA as detailed  under point a) of the table
set forth above under "Amended and Restated Omnibus Termination Agreement".  The
Company does not have a compensation  committee,  and all compensation decisions
are made by the Board of Directors.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The Company's sole member is Waterford Group, L.L.C.

The following  table sets forth the beneficial  ownership  interest in Waterford
Group, L.L.C.


NAME OF                                                         % OWNERSHIP
BENEFICIAL OWNER                                              IN THE COMPANY
----------------                                              --------------
LMW Investments, Inc.(i)..................................        32.2033%
Slavik Suites, Inc.(ii)...................................        67.7967%
                                                              --------------
                                                                       100.0000%
                                                              ==============

(i) LMW  Investments,  Inc.  is owned 50% by Mr. Len Wolman and 50% by Mr.  Mark
Wolman. The address for LMW Investments, Inc. is 914 Hartford Turnpike, P.O. Box
715, Waterford, Connecticut 06385.

(ii)  Messrs.  Len  and  Mark  Wolman  each  own  approximately  11.875%  of the
outstanding shares of Slavik Suites, Inc. Messrs.  Stephan F. Slavik and Richard
Slavik each own approximately 14.35% of the outstanding shares of Slavik Suites,
Inc. The address for Slavik Suites,  Inc. is 32605 West 12 Mile Road, Suite 350,
Farmington Hills, Michigan 48334.

The Company does not currently have in place any equity compensation plans.


                                       29

<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  DEVELOPMENT SERVICES AGREEMENT PHASE II AND RELATED AGREEMENTS AND PAYMENTS

As noted in the  section  above  entitled  "Business - Trading  Cove  Associates
Material Agreements - Development Agreement and Related Agreements", on February
9, 1998,  TCA and KIML,  an  affiliate  of Kerzner  Investments,  the  Company's
partner  in TCA,  entered  into the  Development  Services  Agreement  Phase II.
Pursuant to the Development  Services Agreement Phase II, TCA subcontracted with
KIML, who agreed to perform those  services  assigned to KIML by TCA in order to
facilitate  TCA's  fulfillment  of its duties and  obligations  to the Authority
under  the  Development  Agreement.   KIML  assigned  the  Development  Services
Agreement Phase II to Kerzner Investments.

Pursuant to the  Development  Services  Agreement  Phase II, TCA pays to Kerzner
Investments  the  Development  Services  Fee  Phase II,  which  equals 3% of the
development  costs of the  Project  Sunburst  expansion,  excluding  capitalized
interest, less all costs incurred by TCA in connection with the Project Sunburst
expansion.  At December 31, 2005 all of TCA's costs  associated with the Project
Sunburst  expansion  had not been paid,  however  reasonable  estimates of those
costs have been provided for in TCA's financial statements at December 31, 2005.
The Development  Services Fee Phase II is paid in installments - on December 31,
1999,  December  31,  2000  and  on  the  Completion  Date,  as  defined  in the
Development  Agreement  - with the final  payment  being  made  when the  actual
development  costs of the Project  Sunburst  expansion  are known.  TCA pays the
Development  Services  Fee  Phase  II from  available  cash  flow,  if  any,  in
accordance with the Amended and Restated Omnibus  Termination  Agreement.  TCA's
total  development  costs of the Project Sunburst  expansion which comprises the
Development  Services Fee Phase II and TCA's costs related to the development of
the Project  Sunburst  expansion will exceed the related revenue received by TCA
under the Development Agreement by approximately $15,964,000.  This cost overrun
has previously been recorded by TCA in its statement of operations.

Before KIML  assigned the  Development  Services  Agreement  Phase II to Kerzner
Investments,  it entered into the Local  Construction  Services  Agreement  with
Construction, an affiliate of the Company, pursuant to which Construction agreed
to provide  certain of those  services  assigned to KIML by TCA  pursuant to the
Development  Services  Agreement  Phase  II.  Kerzner  Investments  assumed  the
obligation of KIML under the Local Construction Service Agreement.

Pursuant  to the Local  Construction  Services  Agreement,  Kerzner  Investments
agreed to pay to Construction a fee equal to 20.83% of the Development  Services
Fee  Phase II as and  when  Kerzner  Investments  receives  payment  from TCA in
accordance with the Development Services Agreement Phase II.

Pursuant to a Letter agreement,  Construction has subcontracted  with The Slavik
Company,  an affiliate of the Company,  to provide  certain  services  under the
Local Construction Services Agreement.  In exchange for providing such services,
Construction  agreed that The Slavik Company would be paid a fee equal to 14.30%
of its fee under the Local Construction Services Agreement.

On April 26, 2000,  July 26,  2000,  January 26, 2001 and July 28, 2003 TCA paid
$3,095,000,  $1,238,000,  $6,474,000 and  $9,157,000,  respectively,  as partial
payment  of  the  Development  Services  Fee  Phase  II.  Construction  received
$644,688, $257,875,  $1,348,534, and $1,907,403,  respectively, and Construction
paid The Slavik  Company  $92,190,  $36,876,  $192,840 and $259,121 on April 26,
2000, July 26, 2000, January 26, 2001 and July 28, 2003, respectively.

At December 31, 2005 the accrued  liability to Kerzner  Investments  pursuant to
the Development Services Agreement Phase II was approximately $384,000.

The Development Services Agreement Phase II and the Local Construction  Services
Agreement  were each filed as an exhibit to the Company's,  Quarterly  Report on
Form 10-Q for the period ended March 31, 1999 (Commission File No. 333-17795) as
accepted by the Commission on May 17, 1999, and each is  incorporated  herein by
reference.


                                       30

<PAGE>

                    EMPLOYMENT AGREEMENT WITH MR. LEN WOLMAN

Len Wolman, the Company's Chairman of the Board of Directors and Chief Executive
Officer,  is the  Company's  designated  representative  to TCA  under  the  TCA
Partnership Agreement.

On September 28, 1998, the Company entered into an employment agreement with Len
Wolman.  The employment  agreement provides for a base annual salary of $250,000
reduced by any amounts Mr. Wolman receives as a salary from TCA for such period.
In addition, pursuant to the employment agreement, the Company agreed pay to Mr.
Wolman an amount equal to 0.05% of the revenues of the Mohegan Sun including the
Project  Sunburst  expansion  to the extent Mr.  Wolman  has not  received  such
amounts from TCA. On and after January 1, 2004, the Company agreed to pay to Mr.
Wolman  incentive  compensation  based  on  the  revenues  of the  Mohegan  Sun,
including the Project Sunburst expansion, as a percentage (ranging from 0.00% to
0.10%) to be determined  using a formula  attached to the employment  agreement,
which compares actual revenues to predetermined  revenue targets.  For the years
ended  December  31,  2005,  2004 and 2003,  the  Company  incurred  $1,417,431,
$1,217,420, and $900,998,  respectively,  as an expense pursuant to Len Wolman's
employment agreement.

                        OTHER RELATED PARTY TRANSACTIONS

For each of the years ended  December 31,  2005,  2004,  and 2003  approximately
$42,000 was incurred by TCA to the  principals  and affiliates of the Company as
part of TCA's  operating  expenses.  In  addition,  in  2005,  2004 and 2003 TCA
incurred approximately  $926,000,  $935,000 and $920,000,  respectively,  to the
principals of the Company in  connection  with the first  priority  payments set
forth under the section "Business - Trading Cove Associates  Material Agreements
- Amended and Restated Omnibus Termination Agreement".

In 1999, the Company  renovated Len Wolman's  office space at a cost of $32,413,
of which  $30,000 was paid to Wolman  Homes Inc.,  an  affiliate of the Company.
Cost of the improvement is being  depreciated  over five years.  Expense for the
years  ended  December  31,  2005,  2004  and  2003 was $0,  $553,  and  $6,480,
respectively.

Waterford Group, Slavik Suites, Inc. and the other principals of the Company and
Waterford  Group  have  interests  in and may  acquire  interests  in  hotels in
Southeastern  Connecticut  which have or may have  arrangements with the Mohegan
Sun to reserve and provide hotel rooms to patrons of the Mohegan Sun.

ITEM 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES

For the year ended December 31, 2005

Audit fees                                              $  47,250
Tax fees                                                      750
All other fees
    Excess cash certification                               3,000
                                                        ---------
 Total                                                  $  51,000
                                                        =========

For the year ended December 31, 2004

Audit fees                                              $  44,250
Tax fees                                                      750
All other fees
     Excess cash certification                              2,250

 Total                                                  ---------
                                                        $  47,250
                                                        =========





                                       31



<PAGE>

                                     PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a) EXHIBITS

               Exhibit No.    Description
                 3.1          Certificate of Formation, as amended, of Waterford
                                 Gaming, LLC (i)
                 3.2          Certificate of Incorporation of Waterford Gaming
                                Finance Corp. (i)
                 3.3          Bylaws of Waterford Gaming Finance
                              Corp. (i)
                 4.1          Indenture, dated as of November 8, 1996, between
                              Waterford Gaming, L.L.C. and Waterford Gaming
                              Finance Corp., the issuers, and Fleet National
                              Bank, as trustee, relating to $65,000,000 12-3/4%
                              Senior Notes due 2003. (i)
                 4.1.1        First Supplemental Indenture, dated as of March 4,
                              1999, among Waterford Gaming, L.L.C. and Waterford
                              Gaming Finance, Corp., as issuers, and State
                              Street Bank and Trust Company, as trustee,
                              relating to $65,000,000 12-3/4% Senior Notes due
                              2003.  (vi)
                 4.2          Indenture, dated as of March 17, 1999, among
                              Waterford Gaming, L.L.C. and Waterford Gaming
                              Finance Corp., as issuers, and State Street Bank
                              and Trust Company, as trustee, relating to
                              $125,000,000 9-1/2% Senior Notes
                              due 2010. (vi)
                 4.2.1        First Supplemental Indenture, dated as of June 6,
                              2003, among Waterford Gaming, L.L.C. and Waterford
                              Gaming Finance Corp., as issuers, and U.S. Bank
                              National Association, as trustee, relating to
                              $125,000,000 9-1/2% Senior Notes due 2010. (viii)
                 4.3          Security and Control Agreement, dated as of March
                              17, 1999, among Waterford Gaming, L.L.C. and
                              Waterford Gaming Finance Corp., as pledgors and
                              State Street Bank and Trust Company, as securities
                              intermediary. (vi)
                 4.3.1        Termination Agreement, dated as of June 11,
                              2003, among Waterford Gaming, L.L.C. and
                              Waterford Gaming Finance Corp., and
                              U.S. Bank National Association, as securities
                              intermediary. (viii)
                 4.4          Specimen Form of 9-1/2% Senior Notes due 2010
                              (included in Exhibit 4.2).  (vi)
                 4.5          Indenture, dated as of June 11, 2003, among
                              Waterford Gaming, L.L.C. and Waterford Gaming
                              Finance Corp., as issuers, and U.S. Bank National
                              Association, as trustee, relating to $155,000,000
                              8-5/8% Senior Notes due 2012. (viii)
                 4.6          Security and Control Agreement, dated as of
                              June 11, 2003, among Waterford Gaming, L.L.C. and
                              Waterford Gaming Finance Corp., as pledgors and
                              U.S. Bank National Association, as securities
                              intermediary. (viii)
                 4.7          Specimen Form of 8-5/8% Senior Notes due 2012
                              (included in Exhibit 4.5). (viii)
                 10.1         Omnibus Financing Agreement, dated as of September
                              21, 1995, between Trading Cove Associates and Sun
                              International Hotels Limited. (i)
                 10.2         First Amendment to the Omnibus Financing
                              Agreement, dated as of October 19, 1996, among
                              Trading Cove Associates, Sun International Hotels
                              Limited and Waterford Gaming, L.L.C. (i)
                 10.2.1       Amended and Restated Omnibus Financing Agreement
                              dated September 10, 1997 (ii)
                 10.2.2       Omnibus Termination Agreement, dated as of March
                              18, 1999, among Sun International Hotels Limited,
                              Trading Cove Associates, Waterford Gaming,
                              L.L.C., Sun International Management Limited, LMW
                              Investments, Inc., Sun Cove Limited, Slavik
                              Suites, Inc., and Wolman Construction, L.L.C.(vi)
                 10.2.3       Amended and Restated Omnibus Termination
                              Agreement,  dated as of January 1, 2000 and
                              effective as of March 18, 1999, among Sun
                              International  Hotels Limited, Trading  Cove
                              Associates, Waterford Gaming, L.L.C., Sun
                              International Management Limited, LMW
                              Investments, Inc., Sun Cove Limited, Slavik
                              Suites, Inc., and Wolman Construction, L.L.C.(vii)
                 10.3         Amended and Restated Partnership Agreement of
                              Trading Cove Associates, dated as of September 21,
                              1994, among Sun Cove Limited, RJH Development
                              Corp., Leisure Resort Technology, Inc., Slavik
                              Suites, Inc., and LMW Investments, Inc. (i)



                                       32
<PAGE>


                 10.4         First Amendment to Amended and Restated
                              Partnership Agreement of Trading Cove Associates,
                              dated as of October 22, 1996, among Sun Cove
                              Limited, Slavik Suites, Inc., RJH Development
                              Corp., LMW Investments, Inc. and Waterford Gaming,
                              L.L.C. (i)
                 10.5         Purchase Agreement, dated as of March 10, 1999,
                              among Waterford Gaming, L.L.C., Waterford Gaming
                              Finance Corp., Bear, Stearns & Co., Inc., Merrill
                              Lynch, Pierce, Fenner and Smith Inc. and Salomon
                               Smith Barney. (vi)
                 10.5.1       Agreement with Respect to Redemption or Repurchase
                              of Subordinated Notes, dated September 10,
                              1997 (ii)
                 10.6         Amended and Restated Limited Liability Company
                              Agreement of Waterford Gaming, L.L.C., dated as of
                              March 17, 1999 by Waterford Group, L.L.C.  (vi)
                 10.7         Note Purchase Agreement, dated as of October 19,
                              1996, among Sun International Hotels Limited,
                              Waterford Gaming, L.L.C. and Trading Cove
                                 Associates. (i)
                 10.8         Note Purchase Agreement, dated as of September 29,
                              1995, between the Mohegan Tribal Gaming Authority
                              and Sun International Hotels Limited relating to
                              the Subordinated Notes. (i)
                 10.9         Management Agreement, dated as of July 28, 1994,
                              between the Mohegan Tribe of Indians of
                              Connecticut and Trading Cove Associates. (i)
                 10.10        Management Services Agreement, dated September 10,
                              1997. (ii)
                 10.11        Development Services Agreement, dated September
                              10, 1997. (ii)
                 10.12        Subdevelopment Services Agreement, dated September
                              10, 1997. (ii)
                 10.13        Completion Guarantee and Investment Banking and
                              Financing Arrangement Fee Agreement, dated
                            September 10, 1997. (ii)
                 10.14        Settlement and Release Agreement, dated January 6,
                              1998, by and among Leisure Resort Technology,
                              Inc., Lee R. Tyrol, Trading Cove Associates,
                              Slavik Suites, Inc., LMW Investments, Inc., RJH
                              Development Corp., Waterford Gaming, L.L.C. and
                             Sun Cove Limited. (iii)
                 10.15        Waiver and Acknowledgment of Noteholder. (iv)
                 10.16        Relinquishment Agreement, dated February 7, 1998,
                              between the Mohegan Tribal Gaming Authority and
                              Trading Cove Associates.  (v)
                 10.17        Development Services Agreement, dated February 7,
                              1998, between the Mohegan Tribal Gaming Authority
                              and Trading Cove Associates.  (v)
                 10.18        Agreement, dated September 28, 1998, by and among,
                              Waterford Gaming, L.L.C., Slavik Suites, Inc., LMW
                              Investments, Inc., Len Wolman, Mark Wolman,
                              Stephan F. Slavik, Sr. and Del J. Lauria (Len
                              Wolman's Employment Agreement).  (v)
                 10.19        Agreement Relating to Development Services, dated
                              as of February 9, 1998, between Trading Cove
                              Associates and Sun International Management
                              Limited.  (vi)
                 10.20        Local Construction Services Agreement, dated as of
                              February 9, 1998 between Sun International
                              Management Limited and Wolman Construction,
                              L.L.C. (vi)
                 10.21        Escrow Deposit Agreement,  dated as of the 3rd day
                              of March  1999,  by and among the  Mohegan  Tribal
                              Gaming Authority and First Union National Bank, as
                             Defeasance Agent. (vi)
                     21.1 Subsidiaries of Waterford Gaming,
                                   L.L.C. (i)
                 21.2         Subsidiaries of Waterford Gaming Finance Corp. (i)
                 31           Certifications.  (ix)


                                       33


<PAGE>

     (i)  Incorporated by reference to the Registrant's  Registration  Statement
          on Form S-4, Commission File No. 333-17795,  declared effective on May
          15, 1997.

    (ii)  Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period  ended  September  30, 1997,  Commission  File No.
          333-17795, as accepted by the Commission on November 14, 1997.

    (iii) Incorporated  by reference to the  Registrant's  Annual Report on Form
          10-K for the fiscal year ended December 31, 1997,  Commission File No.
          333-17795, as accepted by the Commission on March 30, 1998.

    (iv)  Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q  for the  period  ended  March  31,  1998,  Commission  File  No.
          333-17795, as accepted by the Commission on May 14, 1998.

    (v)   Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period  ended  September  30, 1998,  Commission  File No.
          333-17795, as accepted by the Commission on November 13, 1998.

    (vi)  Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q  for the  period  ended  March  31,  1999,  Commission  File  No.
          333-17795 as accepted by the Commission on May 17, 1999.

    (vii) Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q  for the  period  ended  March  31,  2001,  Commission  File  No.
          333-17795 as accepted by the Commission on May 14, 2001.

    (viii)Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period ended June 30, 2003, Commission File No. 333-17795
          as accepted by the Commission on August 12, 2003.

    (ix) Filed herewith.


                                       34
<PAGE>


b) FINANCIAL STATEMENTS SCHEDULES



INDEX TO FINANCIAL STATEMENTS


WATERFORD GAMING, L.L.C.
Report of Independent Registered Public Accounting Firm         F-1
Financial Statements:
Balance Sheets as of December 31, 2005 and 2004                 F-2
Statements of Income for the years ended
        December 31, 2005, 2004 and 2003                        F-3
Statements of Changes in Member's Deficiency for the
        years ended December 31, 2005, 2004 and 2003            F-4
Statements of Cash Flows for the years ended
        December 31, 2005, 2004 and 2003                        F-5
Notes to Financial Statements                                   F-6

TRADING COVE ASSOCIATES
Report of Independent Registered Public Accounting Firm         F-18
Financial Statements:
Balance Sheets as of December 31, 2005 and 2004                 F-19
Statements of Operations for the years ended
        December 31, 2005, 2004 and 2003                        F-20
Statements of Changes in Partners' Capital
        for the years ended
        December 31, 2005, 2004 and 2003                        F-21
Statements of Cash Flows for the years ended
        December 31, 2005, 2004 and 2003                        F-22
Notes to Financial Statements                                   F-23







                                       35

<PAGE>

               REPORT OF INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM


To the Member of Waterford Gaming, L.L.C.

In our opinion,  the accompanying  balance sheets and the related  statements of
income,  of changes in member's  deficiency and of cash flows present fairly, in
all material respects,  the financial position of Waterford Gaming,  L.L.C. (the
"Company") at December 31, 2005 and 2004 and the results of its  operations  and
its cash flows for each of the three years in the period ended December 31, 2005
in conformity with accounting principles generally accepted in the United States
of America.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers, LLP
Hartford, CT
March 15, 2006


                                       F-1


<PAGE>


                            Waterford Gaming, L.L.C.

                                 Balance Sheets

                           December 31, 2005 and 2004

                        ---------------------------------
<TABLE>
<CAPTION>


<S>                                                                              <C>                       <C>
                                                                                        2005                     2004
                                                                                  ---------------           ---------------

                 ASSETS

Current assets
    Cash and cash equivalents                                                     $    4,967,809            $    4,571,752
    Restricted investments                                                             5,651,711                 6,104,635
    Other current assets                                                                  34,104                    74,563
                                                                                  ---------------           ---------------
       Total current assets                                                           10,653,624                10,750,950

Trading Cove Associates - equity investment                                           17,406,115                17,052,615
Beneficial interest - Leisure Resort Technology, Inc.                                  3,406,069                 3,784,059
Deferred financing costs, net of accumulated amortization of $1,517,388
       and $939,890 at December 31, 2005 and 2004, respectively                        2,325,643                 2,903,141
Fixed assets, net of accumulated depreciation of $53,918 at December 31, 2005
       and 2004                                                                              ---                       ---
                                                                                  ---------------           ---------------

       Total assets                                                               $   33,791,451            $   34,490,765
                                                                                  ===============           ===============


                 LIABILITIES AND MEMBER'S DEFICIENCY

Current liabilities
    Accrued expenses and accounts payable                                         $      362,871            $      153,404
    Accrued interest on senior notes payable                                           3,290,335                 3,574,743
                                                                                  ---------------           ---------------
       Total current liabilities                                                       3,653,206                 3,728,147

8.625% senior notes payable                                                          129,562,000               140,761,000
                                                                                  ---------------           ---------------

       Total liabilities                                                             133,215,206               144,489,147
                                                                                  ---------------           ---------------

Commitments and contingent liabilities

Member's deficiency                                                                  (99,423,755)             (109,998,382)
                                                                                  ---------------           ---------------
       Total liabilities and member's deficiency                                  $   33,791,451            $   34,490,765
                                                                                  ===============           ===============


The accompanying notes are an integral part of these financial statements.



                                       F-2
</TABLE>



<PAGE>



                            Waterford Gaming, L.L.C.

                              Statements of Income

              For the years ended December 31, 2005, 2004 and 2003


            ---------------------------------------------------------
<TABLE>
<CAPTION>





                                                                    2005                     2004                   2003
                                                                -------------           -------------          -------------

<S>                                                            <c>                     <c>                    <c>
Expenses
      Interest expense                                          $ 12,410,198            $ 13,588,087           $ 19,481,783
      Salaries - related parties                                   1,417,431               1,217,420                900,998
      General and administrative                                     379,195                 848,214                552,586
      9.50% senior notes tender expense                                  ---                     ---                509,414
      Amortization of beneficial interest -
         Leisure Resort Technology, Inc.                             377,990                 377,990                377,990
      Amortization on deferred financing costs                       577,498                 664,918              2,918,310
      Depreciation                                                       ---                     916                 10,780
                                                                -------------           -------------          -------------

              Total expenses                                      15,162,312              16,697,545             24,751,861
                                                                -------------           -------------          -------------


      Interest and dividend income                                   327,064                 117,608                123,634
      Equity in income of
         Trading Cove Associates                                  32,441,918              30,503,631             28,519,860
                                                                -------------           -------------          -------------


              Net income                                        $ 17,606,670            $ 13,923,694           $  3,891,633
                                                                =============           =============          =============


The accompanying notes are an integral part of these financial statements.


                                       F-3

</TABLE>

<PAGE>


                            Waterford Gaming, L.L.C.

                  Statements of Changes in Member's Deficiency

              For the years ended December 31, 2005, 2004 and 2003


           ----------------------------------------------------------
<TABLE>
<CAPTION>

<S>                                                         <C>
Balance, January 1, 2003                                      $  (76,962,084)

Distributions                                                    (47,836,321)

Net income                                                         3,891,633
                                                              ---------------

Balance, December 31, 2003                                      (120,906,772)

Distributions                                                     (3,015,304)

Net income                                                        13,923,694
                                                              ---------------

Balance, December 31, 2004                                      (109,998,382)

Distributions                                                     (7,032,043)

Net income                                                        17,606,670
                                                              ---------------

Balance, December 31, 2005                                    $  (99,423,755)
                                                              ===============


The accompanying notes are an integral part of these financial statements.

                                       F-4

</TABLE>
<PAGE>



                            Waterford Gaming, L.L.C.

                            Statements of Cash Flows

              For the years ended December 31, 2005, 2004 and 2003


            --------------------------------------------------------
<TABLE>
<S>                                                                       <C>               <C>              <C>
                                                                               2005              2004             2003
                                                                           -------------     -------------    -------------

Cash flows from operating activities
    Net income                                                             $ 17,606,670      $ 13,923,694     $  3,891,633
                                                                           -------------     -------------    -------------

    Adjustments to reconcile net income
       to net cash provided by operating activities
         Amortization                                                           955,488         1,042,908        3,296,300
         Depreciation                                                               ---               916           10,780
         Accretion of discount on restricted investment securities             (170,648)          (77,503)         (93,097)
         Equity in income of Trading Cove Associates                        (32,441,918)      (30,503,631)     (28,519,860)
         Operating distributions from Trading Cove Associates                32,088,418        30,416,503       23,526,711
         Changes in operating assets and liabilities
            Other current assets                                                 40,459           (67,311)             713
            Accrued expenses and accounts payable                               209,467             2,869           38,539
            Accrued interest on senior notes payable                           (284,408)         (313,054)         866,601
                                                                           -------------     -------------    -------------
                   Net cash provided by
                      operating activities                                   18,003,528        14,425,391        3,018,320
                                                                           -------------     -------------    -------------

Cash flows from investing activities
    Maturities of restricted investments                                     12,045,607        12,955,088       26,826,113
    Purchases of restricted investments                                     (11,422,035)      (12,358,495)     (23,012,611)
    Contributions to Trading Cove Associates                                        ---               ---         (450,000)
    Distributions from Trading Cove Associates                                      ---               ---          450,000
                                                                           -------------     -------------    -------------
                   Net cash provided by
                       investing activities                                     623,572           596,593        3,813,502
                                                                           -------------     -------------    -------------

Cash flows from financing activities
    Redemption of  8.625% senior notes payable                              (11,199,000)      (12,327,000)      (1,912,000)
    Distributions to member                                                  (7,032,043)       (3,015,304)     (47,836,321)
    Proceeds from 8.625% senior notes issuance                                      ---               ---      155,000,000
    Deferred financing costs                                                        ---               ---       (3,843,031)
    Redemption of  9.50% senior notes payable                                       ---               ---     (108,007,000)
                                                                           -------------     -------------    -------------
                   Net cash used in
                       financing activities                                 (18,231,043)      (15,342,304)      (6,598,352)
                                                                           -------------     -------------    -------------

                   Net change in cash and cash equivalents                      396,057          (320,320)         233,470

Cash and cash equivalents

Beginning of year                                                             4,571,752         4,892,072        4,658,602
                                                                           -------------     -------------    -------------

End of year                                                                $  4,967,809      $  4,571,752     $  4,892,072
                                                                           =============     =============    =============


Supplemental disclosure of cash flow information:
    Cash paid during the year for interest                                 $ 12,694,606      $ 13,901,141     $ 18,615,181
                                                                           =============     =============    =============


The accompanying notes are an integral part of these financial statements.

                                       F-5

</TABLE>

<PAGE>

                            WATERFORD GAMING, L.L.C.

                          NOTES TO FINANCIAL STATEMENTS

ORGANIZATION, MEMBERSHIP AGREEMENT, CHANGE OF OWNERSHIP AND MEMBER ALLOCATIONS:

Waterford Gaming, L.L.C. (the "Company"),  a Delaware limited liability company,
was formed on September  30,  1996.  The Company  initially  acquired and owns a
partnership  interest in Trading Cove Associates  ("TCA"), a Connecticut general
partnership.  The Company is governed  by a Board of  Directors  pursuant to the
limited liability company agreement (the "Agreement"). In June 2003, the Company
with its  wholly-owned  subsidiary  Waterford  Gaming Finance Corp.  ("Finance")
issued $155 Million  8.625% Senior Notes due 2012 (the "8.625% Senior Notes") in
connection  with the redemption of the Company's and Finance's $125 Million 9.5%
Senior Notes due 2010 (the "$125  Million  Senior  Notes").  In March 1999,  the
Company  together  with  Finance  had issued the $125  Million  Senior  Notes in
connection with the redemption of the Company's and Finance's $65 Million 12.75%
Senior Notes due 2003 (the "$65 Million Senior  Notes").  In connection with the
issuance by the  Company's  and Finance's  $125 Million  Senior  Notes,  each of
Slavik Suites,  Inc.  ("Slavik") and LMW Investments,  Inc. ("LMW")  contributed
their  respective  interests  in the  Company as of March 17, 1999 to a Delaware
limited  liability  company,   Waterford  Group,  L.L.C.   ("Waterford  Group").
Waterford  Group is now the  sole  member  of the  Company.  Slavik  and LMW own
Waterford Group in the same respective interest as they had in the Company which
are as follows:

Slavik Suites, Inc.                     67.7967%
LMW Investments, Inc.                   32.2033%
                                       ---------
                                       100.0000%
                                       =========


The Agreement is effective until September 30, 2020 and may be terminated by the
member or any other event as stated in the Agreement.

Finance has no activity and maintains  only $100 in cash.  Therefore,  it is not
consolidated in the accompanying financial statements of the Company.

In  connection  with  the  $125  Million  Senior  Notes  offering,  the  Company
distributed  $37,050,000 to Waterford Group,  L.L.C.  during March 1999.  During
December 1999, the Company  received a payment on notes it held due from Mohegan
Tribal  Gaming  Authority  (the  "Authority")  and a  distribution  from TCA. As
contemplated in the $125 Million Senior Notes offering,  the Company distributed
approximately $34,672,000 to Waterford Group during January 2000. On November 1,
2002 the Company  distributed  $15,000,000 to Waterford Group in accordance with
the  terms of the  indenture  relating  to the $125  Million  Senior  Notes.  In
connection  with the 8.625%  Senior  Notes  offering,  the  Company  distributed
approximately $44,500,000 to Waterford Group during June 2003. Tax distributions
totaling  approximately  $21,262,000 were made by the Company during 1999, 2000,
2001,  2002,  2003,  2004 and 2005.  On January 10, 2006 a tax  distribution  of
approximately  $3,314,000  was made by the  Company.  In  addition  the  Company
distributed  the following  amounts to Waterford  Group in  accordance  with the
terms of the indenture  relating to the 8.625% senior notes (the "8.625%  Senior
Notes Indenture").

        Date of Distribution            Amount Distributed
        --------------------            ------------------

        September 15, 2003                  $  98,080
        March 15, 2004                      $ 349,247
        September 15, 2004                  $ 249,567
        March 15, 2005                      $ 294,585
        September 15, 2005                  $ 336,050
        March 15, 2006                      $ 382,832


1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Accounting Method

The accrual  method of  accounting is used in the  preparation  of the financial
statements.

Cash and Cash Equivalents

Cash  and  cash  equivalents  represent  cash  and  short-term,   highly  liquid
investments  with  original  maturities  of three  months  or less  from date of
purchase.

Restricted Investments

Restricted  investments  at December  31, 2005 are  principally  comprised of an
investment in a Federal National Mortgage  Association  Discount Note, which was
purchased at a discount of 3.68% and matured March 8, 2006, and an investment in
the First  American  Treasury  Obligations  Fund and at  December  31,  2004 are
principally  comprised of an  investment  in a Federal  Home Loan Bank  Discount
Note,  which was  purchased at a discount of 1.82% and matured March 2, 2005 and
an investment in the First American  Treasury  Obligations Fund. The investments
represent a restricted  investment fund that has been established with a trustee
in terms of the 8.625%  Senior  Notes  Indenture  and is  reported  at cost plus
accrued interest, which approximates fair value.

                                       F-6
<PAGE>

Trading Cove Associates - Equity Investment

The  Company's  equity  investment  in TCA is accounted for utilizing the equity
method.  Included in the  investment is the purchase price paid to a corporation
for their 12.50%  interest in TCA.  This amount is amortized on a straight  line
basis over a 189 month period.

The Company  receives  distributions  from TCA in accordance with an Amended and
Restated Omnibus  Termination  Agreement.  The amount of distributions  received
relies  on  the  fees  earned  and  cash   received  by  TCA   pursuant  to  its
Relinquishment  Agreement  with the Authority.  Distributions  are recorded when
received.

Deferred Financing Costs

All costs  incurred  with the issuance of the  Company's  and  Finance's  8.625%
Senior Notes,  were capitalized and are amortized on a straight-line  basis over
the term of the 8.625% Senior Notes.  Additional  amortization  is recorded when
the 8.625% Senior Notes are redeemed. The additional  amortization is the amount
that the redeemed 8.625% Senior Notes represents of the total deferred financing
costs net of accumulated amortization.

Fixed Assets

Fixed Assets are stated at cost. Depreciation is charged against income over the
estimated  life of the  fixed  assets.  The  estimated  life is five  years  for
furniture and fixtures and leasehold improvements.

Income Taxes

The Company,  as a wholly owned  subsidiary  of Waterford  Group,  does not file
federal or state income tax returns.  As a result,  no provision for federal and
state income taxes has been made in the accompanying financial statements.

Concentration of Credit Risk

The Company's  interest in TCA is its  principal  asset and source of income and
cash flow. The Company anticipates regular distributions from TCA based upon the
operating  results of the Authority  and payments of the related  Relinquishment
Fees, as defined, by the Authority.

Financial instruments,  which potentially subject the Company to a concentration
of  credit  risk,  principally  consist  of  cash  in  excess  of the  financial
institutions'  insurance  limits.  The Company invests  available cash with high
credit quality institutions.

Fair Value of Financial Instruments

Fair value of the Company's debt is based on the market  quotations  obtained by
the Company.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and  assumptions  that affect the amounts of assets and liabilities at
the  date  of the  financial  statements,  as well as the  reported  amounts  of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Reclassifications

Certain 2004 and 2003 balances have been  reclassified  to conform with the 2005
presentation.

2. TRADING COVE ASSOCIATES:

TCA was organized on July 23, 1993. The primary purpose of TCA has been,

     a)   to assist the Mohegan Tribe of Indians of  Connecticut  (the "Tribe"),
          in obtaining federal recognition,

     b)   to negotiate the tribal-state compact with the State of Connecticut on
          behalf of the Tribe,

     c)   to obtain  financing  for the initial  development  of the Mohegan Sun
          Casino (the "Mohegan Sun"),

     d)   to  negotiate  the Amended and  Restated  Gaming  Facility  Management
          Agreement (the "Management Agreement"),

     e)   to oversee all  operations of the Mohegan Sun pursuant to the terms of
          the Management Agreement until midnight December 31, 1999, and

     f)   to participate in the design and development of the Mohegan Sun.


                                       F-7

<PAGE>

The Mohegan Sun commenced  operations  on October 12, 1996.  From the opening of
Mohegan Sun until  January 1, 2000,  TCA oversaw  the Mohegan  Sun's  day-to-day
operations.

TCA's Partnership Agreement (the "TCA Partnership  Agreement") will terminate on
December 31, 2040, or earlier,  in accordance with its terms.  The Company has a
50% partnership  interest in TCA. The remaining 50% interest is owned by Kerzner
Investments  Connecticut,  Inc.  ("Kerzner  Investments"),   formerly  Sun  Cove
Limited,   an   affiliate   of   Kerzner    International    Limited   ("Kerzner
International").

As of December 31, 2005, 2004 and 2003 the following summary information relates
to TCA. Total revenues and net income are for the years ended December 31, 2005,
2004 and 2003.


<TABLE>
<CAPTION>

<S>                                          <C>                    <C>              <C>
                                                  2005                    2004             2003
                                              --------------         --------------   --------------
Total current assets                          $  29,543,888          $  27,322,651    $  26,143,405
                                              ==============         ==============   ==============

Total assets                                  $  31,538,844          $  29,539,425    $  28,582,603
Total liabilities                                (1,385,591)              (973,228)      (1,070,719)
                                              --------------         -------------    --------------
Partners' capital                             $  30,153,253          $  28,566,197    $  27,511,884
                                              ==============         ==============   ==============

Total revenues                                $  72,978,466          $  69,144,891    $  69,797,608
                                              ==============         ==============   ==============

Net income                                    $  70,763,892          $  66,887,319    $  62,919,777
                                              ==============         ==============   ==============
</TABLE>

As of December 31, 2005,  2004 and 2003, the following  summarizes the Company's
investment in TCA.

<TABLE>
<CAPTION>

<S>                                           <C>                   <C>               <C>
                                                  2005                   2004              2003
                                              --------------         --------------   --------------
  Trading Cove Associates -
    equity investment, beginning of year      $  17,052,615          $  16,965,487    $  11,972,338
  Contributions                                         ---                    ---          450,000
  Distributions                                 (32,088,418)           (30,416,503)     (23,976,711)
                                              --------------         --------------   --------------

                                                (15,035,803)           (13,451,016)     (11,554,373)
                                              --------------         --------------   --------------
Income from Trading Cove
  Associates                                     32,881,946             30,943,659       28,959,888
Amortization of interests
  purchased                                        (440,028)              (440,028)        (440,028)
                                              --------------         --------------   --------------
Equity in income of
  Trading Cove Associates                        32,441,918             30,503,631       28,519,860
                                              --------------         --------------   --------------
Trading Cove Associates -
   equity investment, end of year             $  17,406,115          $  17,052,615    $  16,965,487
                                              ==============         ==============   ==============

</TABLE>

                                       F-8


<PAGE>



TRADING COVE ASSOCIATES - MATERIAL AGREEMENTS


RELINQUISHMENT AGREEMENT

On February  7, 1998,  TCA and the  Authority  entered  into the  Relinquishment
Agreement   (the   "Relinquishment   Agreement").   Under   the   terms  of  the
Relinquishment  Agreement,  TCA  continued  to manage the  Mohegan Sun under the
Management  Agreement until midnight  December 31, 1999, and on January 1, 2000,
the Management Agreement terminated and the Tribe assumed day-to-day  management
of the Mohegan Sun.

Under the Relinquishment Agreement, to compensate TCA for terminating its rights
under the Management Agreement and the Hotel/Resort  Management  Agreement,  the
Authority agreed to pay to TCA a fee (the "Relinquishment  Fees") equal to 5% of
Revenues, as defined in the Relinquishment  Agreement,  generated by the Mohegan
Sun during the 15-year period  commencing on January 1, 2000,  including revenue
generated  by the Project  Sunburst  expansion  project (the  "Project  Sunburst
expansion").

The  Relinquishment  Fees are divided  into senior  relinquishment  payments and
junior  relinquishment  payments,  each of  which  equals  2.5%  of  "Revenues".
Revenues are defined in the  Relinquishment  Agreement as gross gaming  revenues
(other  than Class II gaming  revenue)  and all other  facility  revenues.  Such
revenue  includes hotel  revenues,  food and beverage sales,  parking  revenues,
ticket revenues and other fees or receipts from the convention/events  center in
the Project  Sunburst  expansion and all rental or other  receipts from lessees,
licensees  and  concessionaires  operating  in the  facility,  but not the gross
receipts of such lessees,  licensees and concessionaires.  Such revenues exclude
revenues generated by any other expansion of the Mohegan Sun.

Senior  relinquishment  payments are payable quarterly in arrears  commencing on
April  25,  2000  for  the  quarter  ended  March  31,  2000,   and  the  junior
relinquishment  payments are payable semi-annually in arrears commencing on July
25, 2000 for the six months ended June 30, 2000,  assuming  sufficient funds are
available after satisfaction of the Authority's senior  obligations,  as defined
in the Relinquishment Agreement.

For the years ended  December 31, 2005,  2004 and 2003 the  Relinquishment  Fees
earned were $72,964,466,  $69,101,491 and $65,099,553,  respectively. The amount
of  Relinquishment  Fees reported are based upon Revenues reported to TCA by the
Authority.

DEVELOPMENT AGREEMENT AND OTHER RELATED AGREEMENTS

On February 7, 1998, TCA and the Authority entered into the Development Services
Agreement (the "Development Agreement").  Pursuant to the Development Agreement,
TCA  agreed to oversee  the  design,  construction,  furnishing,  equipping  and
staffing of the Project Sunburst  expansion for a $14.0 million  development fee
(the "Development Fee").

The first phase of the Project Sunburst  expansion,  including the Casino of the
Sky, The Shops at Mohegan Sun, and the  10,000-seat  Mohegan Sun Arena opened in
September 2001. In April 2002, 734 of the approximately 1,200-hotel rooms in the
34-story  luxury  hotel as well as the  meeting  and  convention  space  and spa
opened.  The balance of the  approximately  1,200-hotel rooms opened during June
2002.  The Project  Sunburst  expansion is complete in terms of the  Development
Agreement.

Pursuant  to  the  Development  Agreement,  the  Authority  agreed  to  pay  the
Development  Fee to TCA  quarterly  beginning  on  January  15,  2000,  based on
incremental  completion  of the Project  Sunburst  expansion  as of each payment
date.  The Authority has paid TCA $14.0 million as  Development  Fee payments in
accordance with the terms of the Development Agreement.

On February 9, 1998, TCA and Kerzner  International  Management Limited ("KIML),
an affiliate of Kerzner  Investments,  entered  into the  Agreement  Relating to
Development  Services (the "Development  Services Agreement Phase II"). Pursuant
to the Development Services Agreement Phase II, TCA subcontracted with KIML, who
agreed  to  perform,  those  services  assigned  to  KIML by TCA,  in  order  to
facilitate  TCA's  fulfillment  of its duties and  obligations  to the Authority
under  the  Development  Agreement.   KIML  assigned  the  Development  Services
Agreement Phase II to Kerzner Investments.

                                       F-9


<PAGE>

Pursuant to the  Development  Services  Agreement  Phase II, TCA pays to Kerzner
Investments a fee, as subcontractor  (the "Development  Services Fee Phase II"),
equal  to 3% of  the  development  costs  of  the  Project  Sunburst  expansion,
excluding  capitalized  interest,  less all costs  incurred by TCA in connection
with the Project  Sunburst  expansion.  At December 31, 2005, all of TCA's costs
associated  with the  Project  Sunburst  expansion  had not been  paid,  however
reasonable  estimates of those costs have been  provided for in TCA's  financial
statements at December 31, 2005. The  Development  Services Fee Phase II is paid
in installments - on December 31, 1999,  December 31, 2000 and on the Completion
Date,  as defined in the  Development  Agreement - with the final  payment being
made when the actual  development  costs of the Project  Sunburst  expansion are
known. TCA pays the Development  Services Fee Phase II from available cash flow,
if  any,  in  accordance  with  an  Amended  and  Restated  Omnibus  Termination
Agreement. TCA's total development costs of the Project Sunburst expansion which
comprises the  Development  Services Fee Phase II and TCA's costs related to the
development of the Project  Sunburst  expansion will exceed the related  revenue
received by TCA under the Development  Agreement by  approximately  $15,964,000.
This cost  overrun  has  previously  been  recorded by TCA in its  statement  of
operations.  At December 31, 2005, the accrued liability to Kerzner  Investments
pursuant to the Development Agreement Phase II was approximately $384,000.

Before KIML  assigned the  Development  Services  Agreement  Phase II to Kerzner
Investments,  it entered into the Local  Construction  Services  Agreement  (the
"Local  Construction  Services  Agreement")  with  Wolman  Construction,  L.L.C.
("Construction"),  pursuant to which  Construction  agreed to provide certain of
those  services  assigned to KIML by TCA  pursuant to the  Development  Services
Agreement Phase II. Kerzner Investments assumed the obligation of KIML under the
Local Construction Service Agreement.

Pursuant  to the Local  Construction  Services  Agreement,  Kerzner  Investments
agreed to pay to  Construction,  an  affiliate  of the  Company,  a fee equal to
20.83% of the Development  Services Fee Phase II as and when Kerzner Investments
receives payment from TCA pursuant to the Development  Services  Agreement Phase
II.

Pursuant to a Letter Agreement,  Construction has subcontracted  with The Slavik
Company,  an affiliate of the Company,  to provide  certain  services  under the
Local Construction Services Agreement.  In exchange for providing such services,
Construction  agreed that The Slavik Company would be paid a fee equal to 14.30%
of its fee under the Local Construction Services Agreement.

AMENDED AND RESTATED OMNIBUS TERMINATION AGREEMENT

Effective March 18, 1999, the Amended and Restated Omnibus Termination Agreement
(the " Amended and Restated Omnibus Termination  Agreement") was entered into by
TCA, Kerzner International,  the Company, KIML, LMW, Kerzner Investments, Slavik
and  Construction.  The Amended and Restated Omnibus  Termination  Agreement (i)
terminated  the  memorandum of  understanding  dated  February 7, 1998; and (ii)
effective  January  1, 2000  terminated  a) the  Amended  and  Restated  Omnibus
Financing  Agreement,  b)the  completion  guarantee and  investment  banking and
financing arrangement fee agreement (the "Financing Arrangement Agreement");  c)
the Management  Services  Agreement;  d) the  Organizational  and Administrative
Services  Agreement;  e) the  Marketing  Services  Agreement;  and  f) a  Letter
Agreement relating to expenses dated October 19, 1996.

In consideration  for the termination of such agreements,  TCA agreed to use its
cash to pay the following obligations in the priority set forth below:

     (i)  First, to pay all unpaid amounts which may be due under the terminated
          Letter  Agreement and to pay certain  affiliates of the Company and to
          Kerzner Investments a percentage of an annual fee of $2.0 million less
          the actual expenses  incurred by TCA during such year. Such annual fee
          is payable in equal  quarterly  installments  beginning March 31, 2000
          and ending  December 31, 2014.  For the years ended December 31, 2005,
          2004  and  2003,  $1,851,397  ($925,698  to  Kerzner  Investments  and
          $925,699  to  affiliates  of the  Company),  $1,869,157  ($934,579  to
          Kerzner  Investments  and $934,578 to  affiliates  of the Company) and
          $1,840,346  ($920,173 to each of Kerzner Investments and affiliates of
          the Company),  respectively,  had been incurred by TCA in terms of the
          first priority.

     (ii) Second,  to return all capital  contributions  made by the partners of
          TCA after  September  29, 1995. As of December 31, 2005, $0 in capital
          contributions remained outstanding.

                                      F-10

<PAGE>

    (iii) Third, to pay any accrued  amounts for obligations  performed prior to
          January 1, 2000 under the Financing  Arrangement  Agreement.  All such
          required payments were made during 2000.

    (iv)  Fourth,  to make the payments set forth in the agreements  relating to
          the Development Services Agreement Phase II and the Local Construction
          Services  Agreement.  No such payments are required or due at December
          31, 2005. The accrued liability to Kerzner Investments with respect to
          such fee at December 31, 2005 was approximately $384,000.

     (v)  Fifth,  to pay  Kerzner  Investments  an annual  fee (in the form of a
          priority  distribution)  of $5.0  million  payable in equal  quarterly
          installments  of $1.25  million  beginning  March 31,  2000 and ending
          December 31, 2006.

    (vi)  Sixth,  to pay any accrued  amounts  for  obligations  performed  with
          respect  to periods  prior to  January  1, 2000  under the  Management
          Services  Agreement,  the Organizational  and Administrative  Services
          Agreement and the Marketing  Services  Agreement.  The final  required
          payments under this priority were made during 2001.

    (vii) Seventh,  for the period  beginning March 31, 2000 and ending December
          31,  2014,  to  pay  each  of  Kerzner  Investments  and  the  Company
          twenty-five   percent   (25%)  of  the   relinquishment   payments  as
          distributions.

    (viii)Eighth, to distribute all excess cash.

On January 26, 2006, TCA made distributions of $1,250,000  pursuant to the fifth
priority,  $14,262,503  ($7,131,252 to Kerzner Investments and $7,131,251 to the
Company) pursuant to the seventh priority and $12,064,928 ($6,032,464 to each of
Kerzner  Investments  and the  Company)  pursuant to the eighth  priority.  Such
distributions will be recorded in the fiscal 2006 financial statements.

In addition,  TCA shall not make any  distributions  pursuant to the Amended and
Restated Omnibus Termination  Agreement until it has annually distributed to its
partners  pro rata,  the amounts  related to its  partners  tax  obligations  as
described in Section  3.03a(1) of the TCA  Partnership  Agreement less twice the
amount of all other funds paid or  distributed  to the Company  during such year
pursuant to the Amended and Restated Omnibus Termination Agreement.

To the extent TCA does not have adequate  cash to make the payments  pursuant to
the Amended and Restated Omnibus Termination Agreement, such amount due shall be
deferred  without the accrual of interest until TCA has  sufficient  cash to pay
them.


3. BENEFICIAL INTEREST - LEISURE RESORT TECHNOLOGY, INC.:

On January 6, 1998,  pursuant to the settlement and release agreement  described
in Note 7 below, the Company paid $5,000,000 to Leisure Resort Technology,  Inc.
("Leisure") and, among other things, Leisure gave up (a) its beneficial interest
of 5% in certain  fees and excess  cash flows,  as  defined,  of TCA and (b) any
other claims it may have had against the Company, TCA and TCA's partners and RJH
Development Corp. (a former partner of TCA).

On August 6, 1997,  Leisure,  a former partner of TCA,  filed a lawsuit  against
TCA,  Kerzner  Investments,  RJH Development  Corp., the Company and its owners,
claiming  breach of contract,  breach of fiduciary  duties and other  matters in
connection with the development of the Mohegan Sun by TCA.

In connection with the settlement of all matters related to such suit,  pursuant
to a settlement and release  agreement,  the Company agreed to acquire Leisure's
interests  in TCA.  As a result of this  acquisition,  Leisure no longer has the
right to 5% of the  Organizational  and  Administrative  fee,  as defined in the
Organizational and  Administrative  Services  Agreement,  and 5% of TCA's Excess
Cash as  defined  in the TCA  Partnership  Agreement;  instead  the  Company  is
entitled to the fees and cash.

On March 18, 1999, the Company paid an additional $2,000,000 to Leisure pursuant
to the settlement  and release  agreement.  On January 7, 2000,  Leisure filed a
complaint  against  the Company and  certain  other  defendants  relating to the
settlement and release agreement. For a description of the complaint, see Note 7
to these financial statements.

Until March 17, 1999,  the payments made to Leisure  pursuant to the  settlement
and release  agreement and associated  costs were  amortized on a  straight-line
basis over the remaining  term of the Management  Agreement.  As a result of the
Relinquishment  Agreement  becoming  effective,  the  remaining  balance will be
amortized over 189 months beginning March 18, 1999. Accumulated  amortization at
December 31, 2005 and 2004, amounts to $3,651,142 and $3,273,152 respectively.

                                      F-11
<PAGE>

4. DEFERRED COSTS:

<TABLE>
<CAPTION>
   Deferred costs consist of the following:
<S>                                            <C>                    <C>
                                                December 31, 2005      December 31, 2004
                                                -----------------      -----------------

        Deferred financing costs                  $    3,843,031          $   3,843,031
        Less accumulated amortization                  1,517,388                939,890
                                                -----------------      -----------------
                                                  $    2,325,643          $   2,903,141
                                                =================      =================

</TABLE>

Amortization  of  deferred  financing  cost  totaling  $577,498,   $664,918  and
$2,918,310  were expensed for the years ending December 31, 2005, 2004 and 2003,
respectively.

The Company's  estimate of amortization  expense for each of the succeeding five
years and thereafter is as follows:

                     Year ending December 31,

                          2006                          $  346,473
                          2007                             346,473
                          2008                             347,423
                          2009                             346,473
                          2010                             346,473
                          Thereafter                       592,328
                                                        ----------
                                                        $2,325,643
                                                        ==========

                                      F-12

<PAGE>

5. $155 MILLION 8.625% SENIOR NOTES PAYABLE:

On June 11,  2003,  the  Company  and Finance  issued the 8.625%  Senior  Notes.
Payment of the  principal  of, and interest on, the 8.625%  Senior Notes is pari
passu in right of payment with all of the Company's  and Finance's  senior debt,
and  effectively  subordinate  in right of payment to all of the  Company's  and
Finance's existing and future collateralized debts.

The 8.625%  Senior  Notes bear  interest at a rate of 8.625% per annum,  payable
semi-annually  in  arrears  on  March  15th  and  September  15th of each  year,
commencing  September 15, 2003.  The  principal  amount due on the 8.625% Senior
Notes is payable on September 15, 2012.

The  Company  and  Finance  may elect to redeem all or any of the 8.625%  Senior
Notes at any time on or after September 15, 2008 at a redemption  price equal to
a  percentage  of the  principal  amount of notes being  redeemed  plus  accrued
interest. Such percentage is set forth in the following table:

<TABLE>
        <S>                                                     <C>
        If notes are redeemed                                   Percentage
        ---------------------                                   ----------

        after September 14, 2008 but
        on or before September 14, 2009                          103.551%
        after September 14, 2009 but
        on or before September 14, 2010                          102.537%
        after September 14, 2010
        but on or before September 14, 2011                      101.522%
        after September 14, 2011 but
        on or before September 14, 2012                          100.507%
        after September 14, 2012                                 100.000%

</TABLE>


The 8.625% Senior Notes provide that upon the  occurrence of a Change of Control
(as defined in the 8.625% Senior Notes Indenture), the holders thereof will have
the option to require the  redemption of the 8.625% Senior Notes at a redemption
price equal to 101% of the principal amount thereof plus accrued interest.

Pursuant to the terms of the 8.625% Senior Notes  Indenture,  if the Company and
Finance  have any Company  Excess  Cash,  as defined in the 8.625%  Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all  Required  IRA True-Up  Payments,  as defined in the 8.625%
Senior Notes Indenture, and less any amount set aside for the payment of accrued
and  unpaid  interest  on the  interest  payment  date that  corresponds  to the
redemption date for which the  determination is being made, to redeem the 8.625%
Senior Notes on the March 15th or September 15th following such dates.  Any such
redemption will be made at a price equal to a percentage of the principal amount
being redeemed. Such percentage is set forth in the following table:




<TABLE>
        <S>                                    <C>
        If notes are redeemed with             Redemption Price (expressed as a percentage
        Company Excess Cash                    of the principal amount being redeemed)
        --------------------------             -------------------------------------------

        after September 14, 2003 but
        on or before September 14, 2004                        108.625%
        after September 14, 2004 but
        on or before September 14, 2005                        107.610%
        after September 14, 2005 but
        on or before September 14, 2006                        106.596%
        after September 14, 2006 but
        on or before September 14, 2007                        105.581%
        after September 14, 2007 but
        on or before September 14, 2008                        104.566%
        after September 14, 2008 but
        on or before September 14, 2009                        103.551%
        after September 14, 2009 but
        on or before September 14, 2010                        102.537%
        after September 14, 2010
        but on or before September 14, 2011                    101.522%
        after September 14, 2011 but
        on or before September 14, 2012                        100.507%
        after September 14, 2012                               100.000%


</TABLE>

                                      F-13

<PAGE>

The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company  Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the  Company  and  Finance  have  determined  was  available  for the  mandatory
redemption  of the 8.625%  Senior  Notes on February  1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture,  (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated,  and (d) the
redemption price at which such redemption was made.

<TABLE>
<S>                 <C>                        <C>                      <C>                    <C>

Date                Company Excess Cash        Principal Amount of      Dates of Redemption     Price (expressed as percentage of
                    (approximately)            notes redeemed                                   principal amount being redeemed
----------------    -------------------        -------------------      --------------------    ---------------------------------
August 1, 2003        $   5,568,000              $ 1,912,000             September 15, 2003                 108.625%
February 1, 2004      $  14,534,000              $ 7,302,000               March 15, 2004                   108.625%
August 1, 2004        $  11,695,000              $ 5,025,000             September 15, 2004                 107.610%
February 1, 2005      $  12,098,000              $ 5,600,000               March 15, 2005                   107.610%
August 1, 2005        $  11,798,000              $ 5,599,000             September 15, 2005                 106.596%
February 1, 2006      $  12,492,000              $ 6,477,000               March 15, 2006                   106.596%



</TABLE>

In certain  circumstances,  if either the  Company or Kerzner  Investments,  the
Company's  partner  in TCA,  exercises  the  option  to buy or sell  partnership
interests in TCA, the Company and Finance must redeem the 8.625% Senior Notes.

The 8.625% Senior Notes  Indenture  contains  certain  affirmative  and negative
covenants   customarily   contained  in  such  agreements,   including   without
limitation,  covenants  that  restrict,  subject  to  specified  exceptions  the
Company's and Finance's ability to (i) borrow money, (ii) make  distributions on
its equity interests or certain other restricted  payments,  (iii) use assets as
security in other transactions,  (iv) make investments, (v) sell other assets or
merge with other companies,  and (vi) engage in any business except as currently
conducted  or  contemplated  or amend their  relationship  with TCA.  The 8.625%
Senior Notes  Indenture  also provides for  customary  events of default and the
establishment  of a  restricted  investment  account with a trustee for interest
reserves  ("IRA").  The IRA consists of an amount of funds equal to the interest
payment due on the 8.625% Senior Notes on the following  interest  payment date.
The IRA will be released  and the Company can make a permitted  distribution  to
Waterford  Group once the Leverage  Ratio, as defined in the 8.625% Senior Notes
Indenture, is less than or equal to 3.0 to 1.0.

The fair value of the Company's  long term debt at December 31, 2005 and 2004 is
estimated to be approximately $137,984,000 and $150,614,000, respectively, based
on the market quotations obtained by the Company.

In June 2005,  the Financial  Accounting  Standards  Board issued DIG Issue B38,
"Evaluation  of  Net  Settlement  with  Respect  to  the  Settlement  of a  Debt
Instrument  Through  Exercise of an Embedded Put Option or Call Option"  ("Issue
B38").  As a  result  of the  issuance  of Issue  B38,  effective  with  periods
beginning  after  December  15, 2005,  the Company is required to bifurcate  and
separately  account for the excess cash  feature  embedded in its 8.625%  Senior
Notes under the provisions of Financial Accounting Standard No. 133, "Accounting
for Derivative  Instruments and Hedging  Activities".  The Company is evaluating
the impact of this  guidance and will adopt the  accounting in its first quarter
of 2006.

6. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION:

The following is a reconciliation of net income for financial statement purposes
to net income for federal  income tax purposes for the years ended  December 31,
2005, 2004 and 2003.

<TABLE>
<CAPTION>

<S>                                 <C>                         <C>                     <C>
                                         2005                        2004                     2003
                                     -------------               -------------           -------------

Financial Statement
 net income                          $ 17,606,670                $ 13,923,694            $  3,891,633
Financial statement equity in
 (income) loss of Trading Cove Associates over tax basis equity in (income) loss
 of
 Trading Cove Associates                   32,859                      16,064              (4,581,809)
Other                                      (2,822)                     (1,981)                  6,124
                                     -------------               -------------           -------------
Federal income tax basis
 net income (loss)                   $ 17,636,707                $ 13,937,777            $   (684,052)
                                     =============               =============           =============

</TABLE>

                                      F-14


<PAGE>


The following is a reconciliation of member's deficiency for financial statement
purposes to member's  deficiency  for federal income tax purposes as of December
31, 2005, 2004 and 2003.


<TABLE>
<CAPTION>

<S>                                      <C>                    <C>                <C>

                                               2005                    2004               2003
                                          ----------------        ---------------    ---------------
Financial statement member's
 deficiency                               $   (99,423,755)        $ (109,998,382)    $ (120,906,772)
Adjustment for cumulative
 difference between tax basis
 of Trading Cove Associates-
 equity investment and GAAP
 basis of Trading Cove
 Associates-equity investment                     772,027                757,944            837,129
Current year financial
 statement net income (over)
 under federal income tax
 basis net income (loss)                           30,037                 14,083         (4,575,685)
                                          ----------------        ---------------    ---------------
Federal income tax basis
 member's deficiency                      $   (98,621,691)        $ (109,226,355)    $ (124,645,328)
                                          ================        ===============    ===============

</TABLE>


7. COMMITMENTS AND CONTINGENT LIABILITIES:

LEGAL PROCEEDINGS

On January 6, 1998,  Leisure Resort  Technology,  Inc. and defendants  Waterford
Gaming,  L.L.C.,  Trading Cove  Associates,  LMW  Investments,  Inc., and Slavik
Suites, Inc. settled a prior lawsuit brought by Leisure. In connection with this
settlement, Leisure, TCA, the Company, LMW Investments, Inc., and Slavik Suites,
Inc.  entered  into  a  settlement  and  release  agreement.  Pursuant  to  this
settlement  and release  agreement,  the  Company  bought  Leisure's  beneficial
interest in TCA.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred  to the  complex  litigation  docket and is  pending  in  Waterbury,
Connecticut.  The  complaint  alleged  breach of  fiduciary  duties,  fraudulent
non-disclosure,  violation of Connecticut  Statutes Section 42-110a, et seq. and
unjust  enrichment  in  connection  with  the  negotiation  by  certain  of  the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting.  The complaint  seeks  unspecified  legal and equitable
damages.

On  February  29,  2000,  Defendants  filed a Motion to Strike  and a Motion for
Summary Judgment, each with respect to all claims. The Court granted Defendants'
Motion to Strike in part and denied Defendants' Motion for Summary Judgment,  on
October 13, 2000.  The Court's order  dismissed the claim for an accounting  and
the claim under  Connecticut  Statutes Section  42-110a,  et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites,  Inc., Len Wolman and Mark Wolman.  In a decision dated August 6,
2001,  the Court  dismissed all claims  against LMW  Investments,  Inc.,  Slavik
Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants  answered the complaint.
In addition,  the Company and Trading Cove Associates asserted counterclaims for
breach of the  settlement  and  release  agreement  and  breach  of the  implied
covenant  of good faith  against  Leisure  and its  president,  Lee Tyrol.  In a
decision dated June 6, 2001, the Court dismissed the  counterclaims  against Lee
Tyrol.  Leisure  moved for summary  judgment  seeking  dismissal  of the counter
claims in full, which motion was denied on April 14, 2003.

Fact   discovery  is  completed.   On  April  15,  2004,  the  Company  and  its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard arguments on this Motion on June 23, 2004. In an August 4, 2004,
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to  each  of the  remaining  three  counts  of the  plaintiff's  complaint.  The
plaintiff  has appealed  this  decision.  On May 9, 2005,  the Supreme  Court of
Connecticut,  without  issuing any ruling on the  substantive  issues  raised by
plaintiff's appeal, transferred the appeal to itself. Oral argument was heard on
September  21, 2005. On January 23, 2006,  the Supreme Court  affirmed the trial
court's decision granting summary judgement in favor of the Defendants on all of
plaintiff's claims. Defendants' counterclaims against plaintiff remain pending.

                                      F-15
<PAGE>


8. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS:

DEVELOPMENT SERVICES AGREEMENT PHASE II AND RELATED AGREEMENTS AND PAYMENTS

On February 9, 1998,  TCA and KIML,  an  affiliate of Kerzner  Investments,  the
Company's partner in TCA, entered into the Development  Services Agreement Phase
II. Pursuant to the Development  Services  Agreement Phase II, TCA subcontracted
with KIML who agreed to perform those services  assigned to KIML by TCA in order
to facilitate  TCA's  fulfillment of its duties and obligations to the Authority
under  the  Development  Agreement.   KIML  assigned  the  Development  Services
Agreement Phase II to Kerzner Investments.

Pursuant to the  Development  Services  Agreement  Phase II, TCA pays to Kerzner
Investments a fee, as subcontractor, equal to 3% of the development costs of the
Project  Sunburst  expansion,  excluding  capitalized  interest,  less all costs
incurred by TCA in connection with the Project Sunburst  expansion.  At December
31, 2005, all of TCA's costs associated with the Project Sunburst  expansion had
not been paid, however reasonable estimates of those cost have been provided for
in TCA's financial statements at December 31, 2005. The Development Services Fee
Phase II is paid in  installments - on December 31, 1999,  December 31, 2000 and
on the Completion Date, as defined in the Development Agreement - with the final
payment  being made when the actual  development  costs of the Project  Sunburst
expansion  are  known.  TCA  pays the  Development  Services  Fee  Phase II from
available cash flow, if any, in accordance with the Amended and Restated Omnibus
Termination Agreement.

Before KIML  assigned the  Development  Services  Agreement  Phase II to Kerzner
Investments,  it entered into the Local  Construction  Services  Agreement  with
Construction, an affiliate of the Company, pursuant to which Construction agreed
to provide  certain of those  services  assigned to KIML by TCA  pursuant to the
Development  Services  Agreement  Phase  II.  Kerzner  Investments  assumed  the
obligation of KIML under the Local Construction Services Agreement.

Pursuant  to the Local  Construction  Services  Agreement,  Kerzner  Investments
agreed to pay to Construction a fee equal to 20.83% of the Development  Services
Fee Phase II as and when Kerzner Investments  receives payment from TCA pursuant
to the Development Services Agreement Phase II.

Pursuant to a Letter Agreement,  Construction has subcontracted  with The Slavik
Company,  an affiliate of the Company,  to provide  certain  services  under the
Local Construction Services Agreement.  In exchange for providing such services,
Construction  agreed that The Slavik Company would be paid a fee equal to 14.30%
of its fee under the Local Construction Services Agreement.

On April 26, 2000,  July 26,  2000,  January 26, 2001 and July 28, 2003 TCA paid
$3,095,000,  $1,238,000,  $6,474,000 and  $9,157,000,  respectively,  as partial
payment  of  the  Development  Services  Fee  Phase  II.  Construction  received
$644,688, $257,875,  $1,348,534 and $1,907,403,  respectively,  and Construction
paid The Slavik  Company  $92,190,  $36,876,  $192,840 and $259,121 on April 26,
2000, July 26, 2000, January 26, 2001 and July 28, 2003, respectively.

At  December  31, 2005 TCA has accrued a  liability  to Kerzner  Investments  of
approximately $384,000, pursuant to the Development Services Agreement Phase II.


EMPLOYMENT AGREEMENT WITH MR. LEN WOLMAN

Len Wolman, the Company's Chairman of the Board of Directors and Chief Executive
Officer,  is the  Company's  designated  representative  to TCA  under  the  TCA
Partnership Agreement.

On September 28, 1998, the Company entered into an employment agreement with Len
Wolman.  The employment  agreement provides for a base annual salary of $250,000
reduced by any amounts Mr. Wolman receives as a salary from TCA for such period.
In addition,  pursuant to the employment agreement, the Company agreed to pay to
Mr. Wolman an amount equal to 0.05% of the revenues of the Mohegan Sun including
the Project  Sunburst  expansion to the extent Mr.  Wolman has not received such
amounts from TCA. On and after January 1, 2004, the Company agreed to pay to Mr.
Wolman  incentive  compensation  based  on  the  revenues  of the  Mohegan  Sun,
including the Project Sunburst expansion, as a percentage (ranging from 0.00% to
0.10%) to be determined  using a formula  attached to the  employment  agreement
which compares actual revenues to predetermined  revenue targets.  For the years
ended  December  31,  2005,  2004  and  2003 the  Company  incurred  $1,417,431,
$1,217,420 and $900,998,  respectively,  as an expense  pursuant to Len Wolman's
employment agreement.


                                      F-16


<PAGE>

OTHER RELATED PARTY TRANSACTIONS

For each of the years ended  December  31,  2005,  2004 and 2003,  approximately
$42,000 was incurred to the  principals and affiliates of the Company as part of
TCA's  operating  expenses.  In  addition  in 2005,  2004 and 2003 TCA  incurred
approximately $926,000, $935,000 and $920,000,  respectively,  to the principals
of the Company in connection  with the first  priority  payments set forth under
the section "Trading Cove Associates  Material Agreements - Amended and Restated
Omnibus Termination Agreement".

In 1999, the Company  renovated Len Wolman's  office space at a cost of $32,413,
of which  $30,000 was paid to Wolman  Homes Inc.,  an  affiliate of the Company.
Cost of the improvement is being  depreciated  over five years.  Expense for the
years  ended  December  31,  2005,  2004  and  2003  was  $0,  $553  and  $6,480
respectively.

Waterford  Group,  Slavik and the other  principals of the Company and Waterford
Group have  interests  in and may acquire  interests  in hotels in  southeastern
Connecticut  which have or may have arrangements with the Mohegan Sun to reserve
and provide hotel rooms to patrons of the Mohegan Sun.


                                      F-17

<PAGE>


             Report of Independent Registered Public Accounting Firm



To the Partners of Trading Cove Associates



In our opinion,  the accompanying  balance sheets and the related  statements of
operations, of changes in partners' capital and of cash flows present fairly, in
all material  respects,  the financial  position of Trading Cove Associates (the
"Partnership")  at December 31, 2005 and 2004, and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
2005, in conformity with accounting  principles generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.







PricewaterhouseCoopers, LLP
Hartford, CT
February 28, 2006


                                      F-18


<PAGE>

                             Trading Cove Associates
                                 Balance Sheets
                           December 31, 2005 and 2004
                           --------------------------
<TABLE>
<S>                                                           <C>                    <C>
                                                                   2005                    2004
                                                                   ----                    ----
Assets
Current assets
     Cash and cash equivalents                                 $  1,031,290           $    732,886
     Relinquishment fee receivable                               28,510,862             26,589,614
     Other current assets                                             1,736                    151
                                                               ------------           ------------
        Total current assets                                     29,543,888             27,322,651

Deferred costs, net of accumulated amortization
     of $3,504,069 and $3,282,551 at December 31, 2005
     and 2004, respectively                                       1,994,872              2,216,390
Property and equipment, net of accumulated depreciation
     of $2,750 and $14,951 at December 31, 2005
     and 2004, respectively                                              84                    384
                                                               ------------           ------------

        Total assets                                           $ 31,538,844           $ 29,539,425
                                                               ============           ============


Liabilities and Partners' Capital
Current liabilities
     Accounts payable and accrued expenses                     $     83,134           $     93,538
     Subcontracted services payable                                 918,425                465,930
     Estimated contract costs due related
        party                                                       384,032                413,760
                                                               ------------             ----------
        Total current liabilities                                 1,385,591                973,228


Commitments and contingent liabilities

Partners' capital                                                30,153,253             28,566,197
                                                               ------------           ------------

        Total liabilities and partners' capital                $ 31,538,844           $ 29,539,425
                                                               ============           ============


</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-19



<PAGE>

                             Trading Cove Associates
                            Statements of Operations
              For the Years Ended December 31, 2005, 2004 and 2003
              ----------------------------------------------------

<TABLE>
<S>                                                           <C>              <C>             <C>
                                                                   2005             2004            2003
                                                                   ----             ----            ----

Revenue
      Relinquishment fee                                       $ 72,964,466     $ 69,101,491    $ 65,099,553
      Development services revenue                                   14,000           43,400       4,698,055
                                                               ------------     ------------    ------------

              Total revenues                                     72,978,466       69,144,891      69,797,608
                                                               ------------     ------------    ------------


Expenses
      Subcontract payments to partners and
        their affiliates                                          1,851,397        1,869,157       1,840,346
      Cost of development services revenue                           14,000           43,400       4,662,055
      Amortization and depreciation                                 221,818          222,424         221,818
      General and administrative                                    148,603          130,843         159,653
                                                               ------------     ------------    ------------

              Total expenses                                      2,235,818        2,265,824       6,883,872
                                                               ------------     ------------    ------------

      Interest and dividend income                                   21,244            8,252           6,041
                                                               ------------     ------------    ------------

              Net income                                       $ 70,763,892     $ 66,887,319    $ 62,919,777
                                                               ============     ============    ============


</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-20


<PAGE>

                             Trading Cove Associates
                   Statements  of Changes  in  Partners'  Capital  For the Years
              Ended December 31, 2005, 2004 and 2003
              ----------------------------------------------------
<TABLE>
<S>                                                           <C>                     <C>               <C>

                                                               Kerzner Investments       Waterford
                                                                 Connecticut Inc.      Gaming, L.L.C.        Total
                                                               -------------------     --------------        -----

Partners' capital, January 1, 2003                                $  8,947,764          $  7,697,764     $ 16,645,528

Net income                                                          33,959,889            28,959,888       62,919,777

Contributions                                                          450,000               450,000          900,000

Distributions                                                      (28,976,711)          (23,976,710)     (52,953,421)
                                                                  ------------          ------------     ------------

Partners' capital, December 31, 2003                                14,380,942            13,130,942       27,511,884

Net income                                                          35,943,660            30,943,659       66,887,319

Distributions                                                      (35,416,503)          (30,416,503)     (65,833,006)
                                                                  ------------          ------------     ------------

Partners' capital, December 31, 2004                                14,908,099            13,658,098       28,566,197

Net income                                                          37,881,946            32,881,946       70,763,892

Distributions                                                      (37,088,418)          (32,088,418)     (69,176,836)
                                                                  ------------          ------------     ------------

Partners' capital, December 31, 2005                              $ 15,701,627          $ 14,451,626     $ 30,153,253
                                                                  ============          ============     ============

</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-21


<PAGE>

                             Trading Cove Associates
                            Statements of Cash Flows
              For the Years Ended December 31, 2005, 2004 and 2003
              ----------------------------------------------------

<TABLE>
<S>                                                               <C>                     <C>                <C>

                                                                       2005                    2004               2003
                                                                       ----                    ----               ----


Cash flows from operating activities
    Net income                                                     $ 70,763,892            $  66,887,319      $ 62,919,777
                                                                   ------------            -------------      ------------

    Adjustments to reconcile net income
       to net cash provided by operating activities
         Amortization                                                   221,518                  222,124           221,518
         Depreciation                                                       300                      300             3,303
         Loss on disposal of property and equipment                         ---                      ---               743
         Gain on sale of property and equipment                             ---                      ---            (1,750)
         Change in operating assets and liabilities
            Relinquishment fee receivable                            (1,921,248)              (1,250,342)       (1,669,449)
            Development fee receivable                                      ---                      ---            84,000
            Other current assets                                         (1,585)                   5,380            (1,531)
            Accounts payable and accrued expenses                       (10,404)                   4,566           (25,884)
            Subcontracted services payable                              452,495                   (8,837)          474,767
            Estimated contract costs due related party                  (29,728)                 (93,220)       (9,899,359)
                                                                   ------------            -------------      ------------

                   Net cash provided by operating activities         69,475,240               65,767,290        52,106,135
                                                                   ------------            -------------      ------------

Cash flows from investing activities
    Proceeds from sale of property and equipment                            ---                      ---             1,750
                                                                   ------------            -------------      ------------
                   Net cash provided by investing activities                ---                      ---             1,750
                                                                   ------------            -------------      ------------

Cash flows from financing activities
    Distributions                                                   (69,176,836)             (65,833,006)      (52,953,421)
    Partners' contributions                                                 ---                      ---           900,000
                                                                   ------------            -------------      ------------
                   Net cash used in financing activities            (69,176,836)             (65,833,006)      (52,053,421)
                                                                   ------------            -------------      ------------

                   Net change in cash and cash equivalents              298,404                  (65,716)           54,464

Cash and cash equivalents

Beginning of year                                                       732,886                  798,602           744,138
                                                                   ------------            -------------      ------------
End of year                                                        $  1,031,290            $     732,886      $    798,602
                                                                   ============            =============      ============


</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-22




<PAGE>

                             TRADING COVE ASSOCIATES

                          NOTES TO FINANCIAL STATEMENTS

1. Organization, Partnership Agreement and Other Material Agreements

     (a) Organization and Partnership Agreement

          Trading Cove Associates  (the  "Partnership"),  a Connecticut  general
          partnership,  was organized on July 23, 1993.  The primary  purpose of
          the Partnership has been:

          (i)  to assist  the  Mohegan  Tribe of  Indians  of  Connecticut  (the
               "Tribe")   and  the  Mohegan   Tribal   Gaming   Authority   (the
               "Authority") in obtaining federal recognition;

          (ii) to  negotiate  the   tribal-state   compact  with  the  State  of
               Connecticut on behalf of the Tribe;

          (iii) to obtain  financing for the initial  development of the Mohegan
               Sun Casino (the "Mohegan Sun");

          (iv) to negotiate the Amended and Restated Gaming Facility  Management
               Agreement, (the "Management Agreement");

          (v)  to oversee all  operations  of the  Mohegan  Sun  pursuant to the
               terms of the Management  Agreement  until  midnight  December 31,
               1999, and

          (vi) to participate in the design and development of the Mohegan Sun.

          The Mohegan Sun  commenced  operations  on October 12, 1996.  From the
          opening of the Mohegan Sun, and until January 1, 2000, the Partnership
          oversaw the Mohegan Sun's day-to-day operations.

          The  Partnership  will terminate on December 31, 2040, or earlier,  in
          accordance   with  the  terms  of  the   partnership   agreement  (the
          "Partnership Agreement").

          The original  partners of the Partnership  were RJH Development  Corp.
          ("RJH"),  a New York  corporation,  Leisure  Resort  Technology,  Inc.
          ("Leisure"),   a  Connecticut   corporation,   Slavik   Suites,   Inc.
          ("Slavik"), a Michigan corporation, and LMW Investments, Inc. ("LMW"),
          a  Connecticut  corporation.  On September 21, 1994,  the  Partnership
          Agreement  was  amended  and  restated  to admit  Kerzner  Investments
          Connecticut, Inc. ("Kerzner Investments"),  a Connecticut corporation,
          formerly Sun Cove Limited, as a partner.

          On February  3, 1995,  Leisure  entered  into an  acknowledgement  and
          release agreement to withdraw as a partner of the Partnership and hold
          its interest in the Partnership as a beneficial interest. On August 6,
          1997,  Leisure  filed  a  lawsuit  against  the  Partnership,  Kerzner
          Investments, RJH and Waterford Gaming, L.L.C. ("Waterford Gaming") and
          its owners,  claiming breach of contract,  breach of fiduciary  duties
          and other matters in connection  with the  development  of the Mohegan
          Sun.  On January 6,  1998,  pursuant  to the  settlement  and  release
          agreement described in Note 6 below,  Waterford Gaming paid $5,000,000
          to  Leisure  and,  among  other  things,  Leisure  gave  up,  (a)  its
          beneficial  interest of 5% of certain  fees and excess cash flows,  as
          defined,  of the  Partnership and (b) any other claims it may have had
          against the Partnership,  Kerzner  Investments,  RJH, Waterford Gaming
          and its  owners.  In  connection  with the  settlement  of all matters
          related  to  such  suit,   pursuant  to  the  settlement  and  release
          agreement,  Waterford Gaming agreed to acquire Leisure's  interests in
          the Partnership.  As a result of this  acquisition,  Leisure no longer
          has the right to 5% of the Organizational  and Administrative  fee, as
          defined in the Organizational and Administrative  Services  Agreement,
          and 5% of the Partnership's  Excess Cash as defined in the Partnership
          Agreement; instead Waterford Gaming is entitled to such fees and cash.
          On March 18, 1999,  Waterford Gaming paid an additional  $2,000,000 to
          Leisure pursuant to the settlement and release  agreement.  On January
          7, 2000, Leisure filed a complaint against the Partnership and certain
          other  defendants.  For a description of the complaint,  see Note 6 to
          these financial statements.

                                      F-23


<PAGE>

          On November 8, 1996, Slavik, LMW and RJH withdrew from the Partnership
          and,  concurrently,  consented to the admission of Waterford Gaming to
          the Partnership.  Waterford  Gaming,  simultaneously,  purchased RJH's
          interest in the  Partnership.  Waterford  Gaming is owned by Waterford
          Group, LLC. Waterford Group, LLC is owned by Slavik and LMW.

          The partners' percentage interest in the Partnership as of November 8,
          1996 was as follows:


                                                          Percentage
          Partner                                          Interest
          -------                                         ----------
          Kerzner Investments Connecticut, Inc.              50.0%
          Waterford Gaming, L.L.C.                           50.0%


      (b) Other Material Agreements

          Relinquishment Agreement

          On February 7, 1998, the  Partnership  and the Authority  entered into
          the Relinquishment Agreement (the "Relinquishment  Agreement").  Under
          the terms of the Relinquishment Agreement the Partnership continued to
          manage the Mohegan Sun under the Management  Agreement  until midnight
          December 31, 1999, and on January 1, 2000,  the  Management  Agreement
          terminated and the Tribe assumed day-to-day  management of the Mohegan
          Sun.

          Under the Relinquishment  Agreement, to compensate the Partnership for
          terminating  its  rights  under  the  Management   Agreement  and  the
          Hotel/Resort Management Agreement,  the Authority agreed to pay to the
          Partnership a fee (the "Relinquishment Fees") equal to 5% of Revenues,
          as defined in the Relinquishment  Agreement,  generated by the Mohegan
          Sun during the 15-year period commencing on January 1, 2000, including
          revenue  generated by the Project  Sunburst  expansion  (the  "Project
          Sunburst expansion").

          The  Relinquishment  Fees  are  divided  into  senior   relinquishment
          payments and junior relinquishment payments, each of which equals 2.5%
          of "Revenues".  Revenues are defined as gross gaming  revenues  (other
          than Class II gaming  revenue) and all other facility  revenues.  Such
          revenue  includes hotel  revenues,  food and beverage  sales,  parking
          revenues,  ticket  revenues  and  other  fees  or  receipts  from  the
          convention/events  center in the Project  Sunburst  expansion  and all
          rental or other receipts from lessees,  licensees and  concessionaires
          operating in the facility, but not the gross receipts of such lessees,
          licensees  and   concessionaires.   Such  revenues   exclude  revenues
          generated  by  any  other   expansion  of  the  Mohegan  Sun.   Senior
          relinquishment payments are payable quarterly in arrears commencing on
          April 25,  2000,  for the quarter  ended March 31, 2000 and the junior
          relinquishment   payments   are  payable   semi-annually   in  arrears
          commencing  on July 25, 2000,  for the six months ended June 30, 2000,
          assuming  sufficient  funds are available  after  satisfaction  of the
          Authority's  senior  obligations,  as  defined  in the  Relinquishment
          Agreement.

Development Agreement

On  February  7,  1998  the  Partnership  and the  Authority  entered  into  the
Development  Services  Agreement (the "Development  Agreement"),  which made the
Partnership the exclusive developer of the Project Sunburst expansion.  Pursuant
to the Development  Agreement,  the Partnership  agreed to oversee the planning,
design, construction, furnishing, equipping and staffing of the Project Sunburst
expansion for a $14.0 million development fee (the "Development Fee").

The first phase of the Project Sunburst  expansion,  including the Casino of the
Sky, The Shops at Mohegan Sun, and the  10,000-seat  Mohegan Sun Arena opened in
September 2001. In April 2002, 734 of the approximately 1,200-hotel rooms in the
34-story  luxury  hotel as well as the  meeting  and  convention  space  and spa
opened.  The balance of the  approximately  1,200-hotel rooms opened during June
2002.  The Project  Sunburst  expansion is complete in terms of the  Development
Agreement.



                                      F-24


<PAGE>


Agreements with Partners and/or their Affiliates

Agreement Relating to Development Services

On February  9, 1998,  the  Partnership  and  Kerzner  International  Management
Limited ("KIML"),  entered into the Agreement  Relating to Development  Services
(the  "Development  Services  Agreement Phase II").  Pursuant to the Development
Services Agreement Phase II, the Partnership  subcontracted with KIML who agreed
to  perform  those  services  assigned  to KIML by the  Partnership  in order to
facilitate the  Partnership's  fulfillment of its duties and  obligations to the
Authority  under the  Development  Agreement.  KIML  subsequently  assigned  the
Development Services Agreement Phase II to Kerzner Investments.

Pursuant to the Development Services Agreement Phase II, the Partnership pays to
Kerzner Investments a fee, as subcontractor (the "Development Services Fee Phase
II"), equal to 3% of the development  costs of the Project  Sunburst  expansion,
excluding  capitalized  interest,  less all costs incurred by the Partnership in
connection with the Project  Sunburst  expansion.  The Development  Services Fee
Phase II shall be paid in installments  due on December 31, 1999 and 2000 and on
the  Completion  Date,  as defined in the  Development  Agreement,  with a final
payment  being made when the actual  development  costs of the Project  Sunburst
expansion are known. The Partnership pays the Development Services Fee Phase II,
from  available  cash flow, if any, in accordance  with the Amended and Restated
Omnibus Termination  Agreement.  At December 31, 2005 and 2004, the total of the
Development  Services Fee Phase II and the  Partnership's  costs  related to the
development of the Project Sunburst expansion exceeded the development  services
revenue from the Authority by approximately  $15,964,000.  This cost overrun has
previously been recorded by the Partnership in its statement of operations.

Before KIML  assigned the  Development  Services  Agreement  Phase II to Kerzner
Investments,  it entered into the Local  Construction  Services  Agreement  (the
"Local  Construction   Services  Agreement")  with  Wolman   Construction,   LLC
("Construction")  pursuant to which  Construction  agreed to provide  certain of
those services  assigned to KIML by the Partnership  pursuant to the Development
Services Agreement Phase II. Kerzner Investments assumed the obligations of KIML
under  the  Local  Construction  Services  Agreement.   Pursuant  to  the  Local
Construction   Services   Agreement,   Kerzner  Investments  agreed  to  pay  to
Construction a fee equal to 20.83% of the  Development  Services Fee Phase II as
and when Kerzner Investments receives payment from the Partnership in accordance
with the Development Services Agreement Phase II.

Construction  has  subcontracted  with The Slavik  Company  to  provide  certain
services under the Local  Construction  Services  Agreement.  In connection with
this,  Construction  agreed that The Slavik Company would be paid a fee equal to
14.30% of its fee under the Local Construction Services Agreement.


Amended and Restated Omnibus Termination Agreement

Effective March 18, 1999, the Amended and Restated Omnibus Termination Agreement
(the "Amended and Restated Omnibus  Termination  Agreement") was entered into by
the  Partnership,   Kerzner  International  Limited  ("Kerzner  International"),
Waterford Gaming, KIML, LMW, Kerzner Investments,  Slavik and Construction.  The
Amended and Restated Omnibus Termination Agreement (i) terminated the memorandum
of  understanding  dated February 7, 1998;  and (ii) effective  January 1, 2000,
terminated  a) the Amended and  Restated  Omnibus  Financing  Agreement;  b) the
Completion  Guarantee  and  Investment  Banking and  Financing  Arrangement  Fee
Agreement (the "Financing  Arrangement  Agreement");  c) the Management Services
Agreement;  d) the Organizational and Administrative  Services Agreement; e) the
Marketing  Services  Agreement;  and f) a Letter Agreement  relating to expenses
dated October 19, 1996.


                                      F-25

<PAGE>

In consideration  for the termination of such  agreements,  the Partnership will
use its cash to pay the following obligations in the priority set forth below:

          (i)  First,  to pay all  unpaid  amounts  which  may be due  under the
               terminated  Letter Agreement and to pay to certain  affiliates of
               Waterford  Gaming and to Kerzner  Investments  a percentage of an
               annual fee of $2.0 million less the actual  expenses  incurred by
               the  Partnership  during  such  year.  Such  annual  fee shall be
               payable in equal quarterly  installments beginning March 31, 2000
               and ending  December 31, 2014.  For the years ended  December 31,
               2005,  2004 and 2003,  $1,851,397,  $1,869,157,  and  $1,840,346,
               respectively,  had been incurred by the  Partnership  in terms of
               the first priority;

          (ii) Second, to return all capital  contributions made by the partners
               of the  Partnership  after September 29, 1995. As of December 31,
               2005, no capital contributions remained outstanding;

          (iii) Third,  to pay any  accrued  amounts for  obligations  performed
               prior  to  January  1,  2000  under  the  Financing   Arrangement
               Agreement. All such required payments were made during 2000;

          (iv) Fourth, to make the payments set forth in the agreements relating
               to the  Development  Services  Agreement  Phase II and the  Local
               Construction  Services  Agreement as detailed under the Agreement
               Relating to  Development  Services  above.  No such  payments are
               required or due at December  31, 2005.  The accrued  liability to
               Kerzner Investments with respect to such fee at December 31, 2005
               was approximately $384,000;

          (v)  Fifth, to pay Kerzner Investments an annual fee (in the form of a
               priority distribution) of $5.0 million payable in equal quarterly
               installments of $1.25 million beginning March 31, 2000 and ending
               December 31, 2006;

          (vi) Sixth, to pay any accrued amounts for obligations  performed with
               respect to periods prior to January 1, 2000 under the  Management
               Services   Agreement,   the   Organizational  and  Administrative
               Services  Agreement and the  Marketing  Services  Agreement.  The
               final  required  payments  under this  priority  were made during
               2001;

          (vii) Seventh,  for the  period  beginning  March 31,  2000 and ending
               December  31,  2014,  to pay  each  of  Kerzner  Investments  and
               Waterford Gaming twenty-five  percent (25%) of the relinquishment
               payments as distributions; and

          (viii) Eighth, to distribute all excess cash.

On January 26, 2006, the Partnership made  distributions of $1,250,000  pursuant
to the fifth  priority,  $14,262,503  ($7,131,252  to  Kerzner  Investments  and
$7,131,251 to Waterford Gaming) pursuant to the seventh priority and $12,064,928
($6,032,464 to each of Kerzner Investments and Waterford Gaming) pursuant to the
eighth  priority.  Such  distributions  will  be  recorded  in the  fiscal  2006
financial statements.

In addition,  the Partnership shall not make any  distributions  pursuant to the
Amended  and  Restated  Omnibus  Termination  Agreement  until  it has  annually
distributed to its partners,  pro rata, the amounts  related to the partners tax
obligations as described in Section  3.03a(1) of the Partnership  Agreement less
twice the amount of all other  funds paid or  distributed  to  Waterford  Gaming
during  such year  pursuant  to the Amended  and  Restated  Omnibus  Termination
Agreement.

To the extent the  Partnership  does not have adequate cash to make the payments
pursuant to the Amended and Restated Omnibus Termination Agreement, such amounts
due shall be deferred  without the accrual of interest until the Partnership has
sufficient cash to pay them.

                                      F-26

<PAGE>


2. Significant Accounting Policies

Cash  and  Cash  Equivalents

Cash  and  cash  equivalents  represent  cash  and  short-term,   highly  liquid
investments with maturities of three months or less at the date of purchase.

Relinquishment Fees

Revenue  is  generated  in  accordance  with  the  terms  of the  Relinquishment
Agreement and recognized quarterly based upon the Revenues of the Authority,  as
reported by the Authority to the Partnership.

Development Services Revenue and Cost Recognition

Revenue  generated from services  performed in accordance  with the terms of the
Development  Agreement  are  recognized on the  percentage-of-completion  basis,
determined by the percentage of costs incurred to date to estimated  total costs
for the contract. This method is used because management considers cost incurred
to be the best available measure of progress on the contract.

Costs of development  services revenue  performed include all direct labor costs
and  those   indirect   costs  related  to  services  such  as   subcontractors,
consultants,  supplies,  depreciation  and other costs.  Changes in performance,
requirements  and estimated  profitability  may result in revisions to costs and
income  and  will be  recognized  in the  period  in  which  the  revisions  are
determined. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.

Deferred Costs

Costs  associated  with acquiring the  Management  Agreement were amortized on a
straight-line basis over the 84-month period of the Management Agreement through
March 3, 1999. As a result of the Relinquishment  Agreement becoming  effective,
the remaining  balance is being  amortized  over 189 months  beginning  March 4,
1999.

Property and Equipment

Office  equipment,  computer  equipment and furniture and fixtures are stated at
cost.  Depreciation  expense is recognized  over a 3-year  estimated life of the
office and computer  equipment and over a 5-year estimated life of furniture and
fixtures.  Depreciation  expense for the years ended December 31, 2005, 2004 and
2003  amounted  to $300,  $300 and $3,303 of which  $-0-,  $-0- and $3,003  were
included in cost of development services revenue, respectively.

Income Taxes

No income tax provision or benefit is recorded on the books of the  Partnership,
as the respective  share of taxable income or loss is reportable by the partners
on their individual tax returns.

Concentration of Credit Risk

The  Partnership's  principal source of revenues and cash flows are the payments
received  and to be  received  pursuant  to the  Relinquishment  Agreement.  The
Partnership  anticipates  regular payments of the  Relinquishment  Fees from the
Authority based upon the operating results of the Authority.

Financial   instruments,   which  potentially   subject  the  Partnership  to  a
concentration  of  credit  risk,  principally  consist  of cash in excess of the
financial institutions' insurance limits. The Partnership invests available cash
with high credit quality institutions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements,  as well as the  reported  amounts of  revenues  and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Payments to Partners and their Affiliates

Payments are made to the partners and/or their affiliates in accordance with the
terms of the Amended and  Restated  Omnibus  Termination  Agreement  for certain
subcontracted  services  rendered  and  are  accounted  for as  expenses  of the
Partnership.




                                      F-27

<PAGE>

3. Deferred Costs

Certain  costs  borne  by the  Partnership  in  connection  with  obtaining  the
Management Agreement and the opening of the Mohegan Sun totaling $5,498,941 were
capitalized.  Amortization  commenced  upon  the  opening  of the  Mohegan  Sun.
Amortization expense, which is being recorded over 189 months on a straight line
basis,  for the years  ended  December  31,  2005,  2004 and 2003 was  $221,518,
$222,124, and $221,518, respectively.

The  Partnership's  estimate of amortization  expense for each of the succeeding
five years and thereafter is as follows:


                 Year Ending December 31,

                        2006                              $  221,518
                        2007                                 221,518
                        2008                                 222,124
                        2009                                 221,518
                        2010                                 221,518
                        Thereafter                           886,676
                                                          -----------
                                                          $1,994,872
                                                          ===========


4. Relinquishment Fees

The  Partnership  entered into a  Relinquishment  Agreement  with the Authority,
which  entitles the  Partnership  to receive a  relinquishment  fee of 5% of the
Revenues generated by the Mohegan Sun including revenue generated by the Project
Sunburst Expansion.

For the years ended December 31, 2005, 2004 and 2003, Relinquishment Fees earned
were  $72,964,466,  $69,101,491  and  $65,099,553,  respectively.  The amount of
Relinquishment  Fees  reported  in these  financial  statements  are based  upon
Revenues  reported to the Partnership by the Authority.  These amounts were paid
by the Authority as follows:

      Date received by the Partnership                              Amount
      --------------------------------                             --------

      April 25, 2005                                            $   8,330,592

      July 25, 2005                                                26,539,416

      October 25, 2005                                              9,583,596

      January 25, 2006                                             28,510,862
                                                                -------------

      Relinquishment Fees earned 2005                           $  72,964,466
                                                                =============



      April 26, 2004                                            $   8,196,363

      July 26, 2004                                                25,150,422

      October 25, 2004                                              9,165,092

      January 25, 2005                                             26,589,614
                                                                -------------

      Relinquishment Fees earned 2004                           $  69,101,491
                                                                =============


      April 25, 2003                                            $   7,433,160

      July 25, 2003                                                23,635,310

      October 27, 2003                                              8,691,811

      January 26, 2004                                             25,339,272
                                                                -------------

      Relinquishment Fees earned 2003                           $  65,099,553
                                                                =============
                                      F-28
<PAGE>


5. Reconciliation of Financial Statements and Tax Information

<TABLE>
<S>                                                      <C>                <C>              <C>
                                                              2005              2004              2003
                                                              ----              ----              ----

            Financial statement net income                $ 70,763,892       $ 66,887,319     $ 62,919,777

            Guaranteed payments to partners                (41,482,232)       (39,550,748)     (39,941,567)

            Financial statement depreciation and
            amortization (greater than) less than tax
            basis depreciation and amortization                   (141)               305           (3,028)

            Percentage of completion accounting
            difference                                         (15,783)           (49,505)      (9,236,479)

            Other                                                  885                572           (4,865)
                                                          ------------       ------------     ------------

            Federal income tax basis net income           $ 29,266,621       $ 27,287,943     $ 13,733,838
                                                          ============       ============     ============

</TABLE>



6. Commitments and Contingent Liabilities

Litigation

On January 6,  1998,  Leisure Resort Technology,  Inc. and defendants  Waterford
Gaming, the Partnership, LMW Investments, Inc. and Slavik Suites, Inc. settled a
prior lawsuit brought by Leisure.  In connection with this settlement,  Leisure,
the Partnership, Waterford Gaming, LMW Investments, Inc. and Slavik Suites, Inc.
entered into a settlement and release agreement. Pursuant to this settlement and
release agreement,  Waterford Gaming bought out Leisure's beneficial interest in
the Partnership.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, the Partnership, LMW
Investments,  Inc.,  Slavik Suites,  Inc.,  Waterford Group, LLC, Len Wolman and
Mark Wolman (collectively, the "Defendants"). The matter has been transferred to
the complex  litigation  docket and is pending in  Waterbury,  Connecticut.  The
complaint  alleged  breach  of  fiduciary  duties,  fraudulent   non-disclosure,
violation of Connecticut Statutes Section 42-110a, et seq. and unjust enrichment
in  connection  with  the  negotiation  by  certain  of  the  Defendants  of the
settlement  and release  agreement.  The  complaint  also brought a claim for an
accounting. The complaint seeks unspecified legal and equitable damages.

On  February  29,  2000,  Defendants  filed a Motion to Strike  and a Motion for
Summary Judgment, each with respect to all claims. The Court granted Defendants'
Motion to Strike in part and denied Defendants' Motion for Summary Judgment,  on
October 13, 2000.  The Court's order  dismissed the claim for an accounting  and
the claim under  Connecticut  Statutes Section  42-110a,  et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites,  Inc., Len Wolman and Mark Wolman.  In a decision dated August 6,
2001, the Court  dismissed all claims against LMW,  Slavik,  Len Wolman and Mark
Wolman.

On November  15,  2000,  the  Partnership  and its  co-defendants  answered  the
complaint.   In  addition,   the  Partnership  and  Waterford   Gaming  asserted
counterclaims  for breach of the settlement and release  agreement and breach of
the implied covenant of good faith against Leisure and its president, Lee Tyrol.
In a decision dated June 6, 2001, the Court dismissed the counterclaims  against
Lee  Tyrol.  Leisure  moved  for  summary  judgment  seeking  dismissal  of  the
counterclaims  in full. This motion for the summary judgment was denied on April
14, 2003.

Fact  discovery  is  completed.  On April  15,  2004,  the  Partnership  and its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard  argument on this motion on June 23, 2004.  In an August 4, 2004
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to  each  of the  remaining  three  counts  of the  plaintiff's  compliant.  The
plaintiff  has appealed  this  decision.  On May 9, 2005,  the Supreme  Court of
Connecticut,  without  issuing any ruling on the  substantive  issues  raised by
plaintiff's  appeals,  transferred the appeal to itself. Oral argument was heard
on September 21, 2005. On January 23, 2006, the Supreme Court affirmed the trial
court's decision  granting summary judgment in favor of the Defendants on all of
plaintiff's claims. Defendant's counterclaims against plaintiff remain pending.



                                      F-29



<PAGE>

c) REPORTS ON FORM 8-K


(i) Form 8-K filed on November 16, 2005

     Item 8.01

          On  November  15,  2005,  the Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed a copy of a press release on Form 8-K,  announcing
          its operating  results for the quarter and fiscal year ended September
          30,  2005, a copy of which has been filed as an exhibit to this report
          and is incorporated by reference to the Authority's  electronic filing
          of such report on Form 8-K,  Securities and Exchange  Commission  file
          reference no. 033-80655.


     Date of Report: November 15, 2005



(ii) Form 8-K filed on December 2, 2005

     Item 8.01

          On  December  2,  2005,  the  Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed Form 8-K/A to supplement the  Authority's  Current
          Report on Form 8-K,  dated  August  28,  2005 and filed on August  30,
          2005,  a copy of which has been filed as an exhibit to this report and
          is incorporated by reference to the Authority's  electronic  filing of
          such report on Form 8-K/A,  Securities  and Exchange  Commission  file
          reference no. 033-80655.


     Date of Report: December 2, 2005



(iii)Form 8-K filed on December 12, 2005

     Item 8.01

          On  December  9,  2005,  the  Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed its annual report on Form 10-K, for the year ended
          September  30,  2005,  a copy of which has been filed as an exhibit to
          this  report  and is  incorporated  by  reference  to the  Authority's
          electronic filing of such report on Form 10-K, Securities and Exchange
          Commission file reference no. 033-80655.

     Date of Report: December 9, 2005



(iv) Form 8-K filed on January 18, 2006

     Item 8.01

          On  January  17,  2006,  the  Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed Form 8-K,  relating  to the posting on January 17,
          2006, on its website of its Slot Machine Statistical Report containing
          statistics  relating to slot handle,  gross slot win,  gross slot hold
          percentage, slot win contributions and weighted average number of slot
          machines at Mohegan Sun, on a monthly basis for the three months ended
          December 31, 2005 and the fiscal year ended September 30, 2005, a copy
          of  which  has  been  filed  as an  exhibit  to  this  report  and  is
          incorporated by reference to the Authority's electronic filing of such
          report on Form 8-K,  Securities and Exchange Commission file reference
          no. 033-80655.


     Date of Report: January 17, 2006

                                       36

<PAGE>

(v) Form 8-K filed on January 25, 2006

    Item 8.01

          On January 6, 1998, Leisure Resort Technology, Inc. ("Leisure Resort")
          and defendants  Waterford  Gaming,  LLC, Trading Cove Associates,  LMW
          Investments,  Inc.,  and Slavik Suites,  Inc.  settled a prior lawsuit
          brought  by  Leisure  Resort.  Leisure  Resort is a former  beneficial
          interest holder in Trading Cove Associates,  a general  partnership of
          which  Waterford  Gaming,  LLC is a partner.  In connection  with this
          settlement,  Leisure  Resort and Trading  Cove  Associates,  Waterford
          Gaming LLC, LMW  Investments,  Inc., and Slavik Suites,  Inc.  entered
          into a  Settlement  and  Release.  Pursuant  to  this  Settlement  and
          Release,  Waterford Gaming, LLC bought out Leisure Resort's beneficial
          interest in Trading Cove  Associates.  In its current  lawsuit,  filed
          January 7, 2000,  Leisure Resort claims in an Amended  Complaint dated
          February 4, 2000,  that in  connection  with the  negotiation  of this
          Settlement and Release it was not properly informed of and involved in
          certain  negotiations  between  Waterford  Gaming,  LLC,  Trading Cove
          Associates,  LMW Investments,  Inc.,  Slavik Suites,  Inc.,  Waterford
          Group,   LLC,   Len  Wolman  and  Mark   Wolman   (collectively,   the
          "Defendants")  and the Mohegan  Tribe of Indians of  Connecticut  (the
          "Tribe") regarding a possible  extension to the business  relationship
          between Trading Cove Associates and the Tribe.  Leisure Resort further
          alleges that as a result of Defendants' alleged acts, Leisure Resort's
          assessment of the value of its beneficial interest was affected and it
          was not able to make a fully-informed decision regarding the execution
          of the Settlement and Release.  Leisure Resort has asserted claims for
          breach of  fiduciary  duty,  fraudulent  non-disclosure,  unfair trade
          practices under Connecticut  General Statutes ss. 42-110a et seq., and
          unjust enrichment.

          By  Memorandum of Decision  dated  October 13, 2000,  the Court struck
          Leisure's cause of action for unfair trade  practices,  struck Leisure
          Resort's claim for an accounting, and struck the alter ego allegations
          in the Complaint against LMW Investments,  Inc., Slavik Suites,  Inc.,
          Len Wolman, and Mark Wolman.

          On November 15,  2000,  the  Defendants  answered  the  Complaint.  In
          addition,  Waterford Gaming, LLC and Trading Cove Associates  asserted
          counterclaims  for breach of the  Settlement and Release and Breach of
          the Implied  Covenant  of Good Faith  against  Leisure  Resort and its
          president,  Lee Tyrol (the "Counterclaim").  Tyrol was served with the
          summons and Counterclaim on January 2, 2001.

          By Memorandum of Decision dated June 13, 2001, the Court dismissed the
          counterclaims  against Tyrol.  By Memorandum of Decision dated August,
          6, 2001, the Court struck the first and second counts of the Complaint
          against LMW Investments,  Inc., Slavik Suites,  Inc., Len Wolman,  and
          Mark Wolman.

          Leisure Resort also moved for summary  judgment  seeking  dismissal of
          the counterclaims in full. This motion for summary judgment was denied
          on April 14, 2003.

          The  Defendants  then moved for summary  judgment  on April 15,  2004,
          seeking dismissal of Leisure Resort's  remaining claims for fraudulent
          non-disclosure,  breach of fiduciary duty, and unjust  enrichment.  By
          Memorandum of Decision dated August 4, 2004 ("Order  Granting  Summary
          Judgment"), the Court granted the Defendants' motion and dismissed the
          clams against the  Defendants.  Leisure  Resort filed an appeal of the
          Court's Order Granting  Summary  Judgment and the Defendants  filed an
          opposition to that appeal.

          On May 9, 2005,  the  Connecticut  Supreme Court  transferred  Leisure
          Resort's  appeal of the trial  court's  grant of summary  judgment  in
          favor of the  Defendants,  to itself.  The  Connecticut  Supreme Court
          heard oral argument on Leisure  Resort's appeal on September 21, 2005.
          On January 23, 2006,  the Supreme  Court  affirmed  the trial  court's
          decision  granting  summary judgment in favor of the defendants on all
          of  plaintiff's  claims.  Defendants'  counterclaims  against  Leisure
          Resort remain pending.

     Date of Report: January 23, 2006


                                       37

<PAGE>

(vi)Form 8-K filed on January 31, 2006

     Item 8.01

          On  January  31,  2006,  the  Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed a copy of a press release on Form 8-K,  announcing
          its operating  results for the quarter ended December 31, 2005, a copy
          of  which  has  been  filed  as an  exhibit  to  this  report  and  is
          incorporated by reference to the Authority's electronic filing of such
          report on Form 8-K,  Securities and Exchange Commission file reference
          no. 033-80655.


     Date of Report: January 31, 2006



(vii)Form 8-K filed on February 15, 2006

     Item 8.01

          On  February  14,  2006,  the Mohegan  Tribal  Gaming  Authority  (the
          "Authority")  filed its quarterly  report on Form 10-Q for the quarter
          ended  December 31, 2005, a copy of which has been filed as an exhibit
          to this report and is  incorporated  by reference  to the  Authority's
          electronic filing of such report on Form 10-Q, Securities and Exchange
          Commission file reference no. 033-80655.


     Date of Report: February  14,  2006

                                       38

<PAGE>



Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.



                            WATERFORD GAMING, L.L.C.




Date:  March 27, 2006                       By: /s/ Len Wolman
                                            ------------------------------------
                                            Len Wolman, Chairman of the Board of
                                            Directors, Chief Executive Officer


Date:  March 27, 2006                       By: /s/ Alan Angel
                                            ------------------------------------
                                            Alan Angel, Chief Financial Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 27, 2006.




SIGNATURE                                    TITLE


/s/ Len Wolman                               Chairman of the Board of Directors,
---------------------------
Len Wolman                                   Chief Executive Officer


/s/Del J. Lauria                             Member of the Board of Directors,
---------------------------
Del J. Lauria                                Secretary


/s/ Mark Wolman                              Member of the Board of Directors
---------------------------
Mark Wolman


/s/ Stephen F. Slavik                        Member of the Board of Directors
---------------------------
Stephen F. Slavik


                                       39